How do UK business leaders feel about the General Election?

Sentiment among the UK’s top business executives indicates confidence as the second quarter approaches, in addition to general optimism for the general election later in the year.

In a recent study by KPMG UK, 88% of surveyed leaders expressed assurance in the potential for overall business growth in the forthcoming quarter, with 45% describing their confidence level as moderate and 43% viewing their prospects with high confidence. Meanwhile, 87% maintain a hopeful stance regarding their profitability during this period.

Insurance sector leaders were behind the overall average, indicting cautious optimism, with 79% confident about the upcoming quarter’s prospects. Banking professionals exhibited a slight increase in optimism, with 94% anticipating a successful second quarter, an improvement from the 89% optimistic outlook seen in the first quarter of 2024.

Conversely, confidence levels have dipped among asset and wealth management experts, dropping to 83% from an initial 89%.

What impact will a General election have?

Leaders also appear undaunted by the prospect of a general election later in the year, with 67% viewing it as a positive event for the sector. The survey revealed prioritisations around enhancing the sector’s competitiveness, expanding its regional presence for growth, and navigating the advantages and risks associated with artificial intelligence as key areas for government policy focus.

Despite this optimistic forecast, the financial services sector continues to navigate cost-related challenges, exacerbated by inflation and interest rate impacts. Around 40% of executives identify cost pressures as a primary concern for their businesses in the next quarter.

To mitigate these financial strains, over a third of the sector’s leaders are considering strategies such as reassessing supplier contracts (37%) and leveraging technology like Generative AI to boost productivity (35%).

Additionally, nearly a quarter (23%) plan to implement measures such as reducing staff numbers, altering their real estate strategies, and revising employee compensation and benefits as part of their cost-saving initiatives.

Karim Haji, the global and UK head of financial services at KPMG, explained how 2024’s start will set the tempo for the rest of the year, but also warned of challenges ahead.

“However, while financial services leaders are keeping an optimistic outlook, they do so with caution as costs are still a concern, and the sector continues to eye up savings in response to economic pressures. The prospect of a general election isn’t shaking the financial services sector. In fact, most leaders are surprisingly upbeat about it. Regardless of the political environment and while the economy is showing some signs of recovery, the coming months will continue to be challenging,” Haji said.

“Not only does the sector need to remain resilient now, but it also needs to look longer-term and invest in ways to boost productivity through technology, effectively respond to regulatory demands and build sustainable business models. This will all be an essential driver of growth and will lay solid foundations for competitiveness as the economy rebounds.”

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