Brexit remains concern despite sentiment growth in UK FS sector

Brexit-driven policy disruptions continue to jolt UK financial service (FS) companies as the looming threat of a no-deal Brexit and its uncertainty have made financial institutions wary of any significant investment, says GlobalData, a leading data and analytics company.

Rinaldo Pereira, Senior Analyst at GlobalData, comments: “The mentions of ‘Brexit’ (in all FS company filings) increased by 72% from 2018 to 2019 but were not as prevalent in 2020. The highest number of Brexit mentions in all filings were 145, in the month of March 2020. The efforts of policymakers to mitigate the effects of the COVID-19 pandemic caused a shift away from Brexit negotiations, which has further complicated the business regime of financial institutions.”

Top financial institutions in the UK suffered losses but experienced sentiment growth. For instance, HSBC reported a dismal quarter due to COVID-19, reporting profits for Q2 2020 (ended June 2020) before tax as down by 87% year-on-year. At the same time, HSBC’s sentiments grew by around 38% in Q2 2020 due to improved cash flow and capital ratio. Meanwhile, Natwest Group witnessed sentiment growth in Q2 2020, despite its sub-par performance. The company’s sentiments were driven by reduced overall operating costs, a high level of liquidity and optimism around the recent lifting of lockdown.

Pereira concludes: “While a resurgence of the economy will provide some relief, GlobalData’s Filing Analytics tool identified that acquisition discussions are not as prevalent as last year, with only 46% of 2019 mentions in 2020 to date.

“While the impact of COVID-19 on the UK financial institutions was a deciding factor that negatively impacted sentiments for transcripts released in Q2 2020, sentiments have since shown signs of recovery in Q3 2020 due to the gradual lifting of the lockdown. However, the rebound is expected to be short-term due to the uncertainties caused by Brexit.”

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