The new Conservative Government should focus on cutting the cost of regulatory compliance, financial services firms say.
According to the latest quarterly CBI and PwC financial services survey, tax stability was the second most popular concern among the industry, especially for general insurers and investment managers.
Banks, investment banks and other companies, including life insurers, also blamed regulation for falling productivity, the survey shows.
Particularly, increasing competition, at 75 per cent, and statutory legislation and regulation, at 67 per cent, were the factors cited as most likely to limit their business expansion over the next year.
CBI director of economics Rain Newton-Smith says: “Demand for financial services continues to strengthen, with profits holding up and employment showing signs of an improving trend.
“But the cost of regulation and tax uncertainty are a top concern for firms across the sector. They want to see the government focus on keeping the UK a competitive financial centre by not putting UK firms at a disadvantage.”
The survey also found that business volumes are set to grow at a slightly faster pace over the next quarter, with profits predicted to increase in most sectors apart from banking.
PwC UK financial services head Kevin Burrowes says: “Levels of optimism amongst banks remains broadly unchanged this quarter which is a little surprising as we had expected to see a bounce from the election result and the greater encouragement for financial services from the new Government.
“However, ongoing regulatory uncertainty, the EU referendum and other macro-economic factors have dampened the outlook at least in the short term.”