Overview of KPMG’s Latest Survey
KPMG, a renowned entity in audit, tax, and advisory services, has unveiled the findings of its current UK Financial Services Sentiment survey. The report highlights a dip in confidence among financial services leaders concerning anticipated profitability.
With geopolitical events continuing to unsettle the global economic landscape, over 60% of financial services executives are ramping up their investments in risk management strategies. Despite these hurdles, the outlook for business growth in the second quarter of 2025 remains optimistic, with nearly 90% of leaders maintaining confidence in the sector’s trajectory.
Profitability and Investment Trends
The survey, which garnered insights from over 150 industry leaders, noted a decline in profitability confidence, dropping by five percentage points from 94% in the first quarter of 2025 to 89% in the second quarter. However, compared to a year ago, leaders are more optimistic, with confidence levels at 89% for Q2 2025, up from 87% in the same period of 2024. This change signifies a cautious optimism amid ongoing uncertainties.
Geopolitical risks have taken center stage, with nearly 30% of leaders identifying them as a primary concern for the upcoming quarter. In response, six out of ten financial services leaders are channeling more revenues into risk mitigation, including business continuity planning and enhancing cyber resilience. On average, leaders are allocating 8% of their total revenues to secure their operations, with plans to increase this to 10% by 2030. More than a quarter (28%) foresee allocating over 15% of their revenues by decade’s end.
Comments from Industry Experts
Karim Haji, Global and UK Head of Financial Services at KPMG, commented, “We are amidst the most volatile geopolitical and economic climate since 2008, challenging the stability upon which the sector thrives. Despite reduced confidence in future profitability, it is heartening to witness leaders maintain a positive short-term outlook, bolstered by the uptick in the services sector growth reported in March. However, volatility is exerting pressure on revenues, and this trend seems poised to persist.”
“The most pronounced threat to future growth and lower inflation remains the precarious geopolitical landscape. This situation is shifting investment priorities from efficiency to resilience,” Haji added. “This trend will persist as financial services firms navigate the complex challenges of rising global tensions, cybersecurity threats, the ripple effects of China’s sluggish growth, and ongoing economic pressures.”
“While investment in risk-proofing may strain revenues, if executed strategically, it will enhance understanding of geopolitical risk exposure, improve business preparedness, and facilitate growth opportunities,” Haji concluded.
Future Outlook and Government Initiatives
Despite these concerns, leaders retain optimism about the financial services sector’s future, particularly in relation to government initiatives aimed at growth through regulatory reform. Confidence in the Chancellor’s “regulate for growth” agenda and the introduction of a Financial Services Competitiveness Strategy has surged, with 85% of leaders expressing confidence in these measures to boost the sector’s competitiveness, up from 70% in the first quarter of 2025.
Leaders are hopeful that the government’s initiatives will attract foreign investment and bolster the UK’s standing in sustainable finance and fintech. Nonetheless, a few leaders have voiced worries over potential obstacles, such as tax hikes and broader economic challenges, that could impede the government’s objectives.
Looking forward, financial services leaders are confident in the UK’s ability to retain its status as a global financial hub. Nearly 80% of respondents believe the UK will maintain a prominent role in the global financial scene over the next three years, with six in ten asserting that the country is now more attractive to investors than it was five years ago.
Despite facing economic and geopolitical challenges, the survey reflects a cautious optimism about the future growth and resilience of the UK financial services industry.
Karim Haji concluded, “The Chancellor’s plan to stimulate economic growth by reducing regulatory complexity is already underway, as evidenced by the integration of the Payment Systems Regulator into the FCA. This move may have boosted leaders’ confidence that the country is indeed progressing towards reform.”
“Leaders crave certainty and clarity, so simplifying regulations is welcome. However, deregulation carries risks and must be balanced to maintain a stable financial system, especially in such a volatile world.”
“Despite rising confidence in the government’s sector plans, there are lingering concerns about the impact of tax increases and economic pressures on financial services growth. Leaders will seek more details on the Chancellor’s plans to solidify the UK’s position as a premier financial center.”
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