Lloyds Bank has just released its ninth “Financial Institutions Sentiment Survey,” which examines how banks, wealth and asset managers, insurers, and financial sponsors view economic growth, their investments and expansion plans.

UK financial institutions – including wealth managers – are stepping up investments and accelerating expansion plans, according to the latest Financial Institutions Sentiment Survey by Lloyds Bank. It found that economic conditions have improved compared with 12 months ago.

The annual survey, which interviewed over 100 senior decision-makers at banks, wealth and asset managers, insurers, and financial sponsors, opened in April and ran until June 2024, just before the 4 July UK general election. 

There was a big increase in positive sentiment compared with 12 months ago. Almost half of respondents think economic growth will improve, an increase from 21 per cent in 2023 and 7 per cent in 2022, marking a two-year high. Similarly, 43 per cent expect growth in the financial sector, up from 27 per cent in 2023 and 12 per cent in 2022.

Confidence is also strong when looking longer-term. Over two-thirds of financial institutions are optimistic about the UK economy beyond 2025, and nearly two-thirds share a similar optimism for growth in the financial services sector specifically, the survey showed. 

This improving confidence in the macroeconomic environment is helping to bolster financial institutions’ own growth prospects. The survey indicates that over half of institutions are more optimistic about their growth over the next 12 months. To support these ambitions, respondents are planning to expand in existing markets and enter new markets, and launch new products and services.

Factors creating this optimism include easing rates of inflation and the expectation that rate reductions will come later this year.

"This year's survey has revealed a significant shift towards optimism in both the UK economy and the financial services sector. This is in line with what we are hearing and seeing directly from our clients,” Lisa Francis, managing director, institutional coverage, Lloyds Bank Corporate & Institutional Banking, said. “Deal activity is ahead of last year and there’s positive momentum as this renewed optimism is fuelling our clients' growth ambitions, whether by expanding into new and existing markets or launching new products and services." 

“Overall, this paints an exciting picture for the UK’s financial services industry, which is crucial to the UK’s economy and our position on the global stage,” she continued.

The survey also revealed growing confidence in London’s status as a leading global financial hub. Sixty three per cent of respondents believe that the capital will retain its position on the global stage, up from 50 per cent in 2023. Forty three per cent of UK financial institutions believe that initiatives to encourage foreign direct investment into the UK would help increase London's status.

However, financial institutions are cautious about barriers to expansion, with 62 per cent of respondents apprehensive about geopolitical uncertainty, a significant increase from 22 per cent in 2023. A third of financial institutions saw global trade barriers as a key obstacle to economic performance over the next year, while 41 per cent acknowledged the productivity challenges facing the UK.