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Financial services bosses paint gloomy revenue outlook

Revenue expectations for 2020 are being lowered and financial services firms are preparing to cut operating budgets ahead of what they expect will be a challenging 2021.

This is according to a recent new snap poll by Luxembourg for Finance, the duchy’s development agency for the industry.

In October 2020, it asked nearly 400 senior or C-suite executives working at international financial services firms – including major banks, asset managers, insurers, and private equity firms – for their views on the macro economic situation.

The results revealed that 60% of respondents are forecasting lower than expected revenues for the end of 2020 and 75% expect to see no international investment growth in 2021, with 31% even expecting a decrease.

Hope of revenue growth in 2021

On a brighter note, 55% of respondents said they were “rather confident” about revenue growth next year, with a further 9% purporting to be “absolutely confident”.

This could, however, be linked to the fact that over half (56%) plan to reduce their operating budgets for 2021.

The survey also asked how companies were embracing new ways of working given ongoing social distancing measures and stay-at-home requests from governments across Europe.

Asked what they would do if restrictions were lifted and the situation normalises in 2021, nearly three quarters (74%) said they would continue with some sort of remote working approach for at least one day a week, with 32% saying they would allow two-to-three days per week if possible.

Spring snapshot

Back in May, in Luxembourg for Finance’s previous survey of the same group, 82% of respondents said they saw covid-19 as having a slowing effect on globalisation, with 51% also expecting an increasing fragmentation of the EU single market.

Respondents viewed digitalisation (57%), sustainable finance (52%) and global growth (43%) as the top three sources for their future expansion; focused primarily on Europe (90%), Asia (34%) and the US (25%).

Commenting specifically on the October survey, Nicolas Mackel, chief executive of Luxembourg for Finance, noted: “Unsurprisingly, most financial services chiefs forecast headwinds, such as continued geopolitical risks, in the short to medium term. 2021 looks set to be challenging with many cutting operating budgets and shrinking their global investments.”

However, Mackel said it was reassuring to see some considerable confidence about top line growth returning next year.

He added: “It is also clear that remote working is going to be a lasting legacy of this crisis, which in my view has its pros and cons.”

Build back better

Mackel concluded: “This is a critical time for national policymakers. They must work together to ensure that the financial sector can continue to play its role in supporting real economies, and boosting growth and jobs, across global markets.

“It is vital that finance is enabled to underpin the ‘build back better’ agenda, and more specifically Europe’s bold Green Deal.”

The European Green Deal provides plans to boost the efficient use of resources by moving to a clean, circular economy.

It aims to restore biodiversity and cut pollution

The EU in targetting climate neutrality in 2050 primarily by investing in environment-friendly technologies; decarbonising the energy sector and working with international partners to improve global environmental standards.

David Burrows

For more than 25 years, Dave has written for a wide range of newspapers and broadcasters including The Times, The Financial Times, The Independent, The Wall Street Journal, The Mail on Sunday, Reuters...

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