CBI survey points to brighter 2026 for financial services sector

The UK’s financial services sector ended 2025 facing falling business volumes, shrinking profitability and weakening sentiment, according to the latest CBI Financial Services Survey. However, firms are cautiously optimistic that conditions will improve as they head into 2026.

The quarterly survey – conducted between 20 November and 9 December – reveals that business volumes declined sharply for the third consecutive quarter, with a weighted balance of -38% in the three months to December (from -36% in September). Profitability also fell at a steep pace over Q4 (-53%), contributing to a deterioration in sentiment for the sixth quarter running.

Despite the subdued end to the year, financial services firms expect a modest rebound in the first quarter of 2026. Volumes are forecast to return to growth (+18%), with profitability expected to recover slightly (+6%). Headcount, which was broadly flat in Q4, is anticipated to decline marginally (-8%) over the next three months.

Investment intentions remain mixed. Companies expect to increase spending on IT – at the strongest rate since September 2023 – while reducing capital expenditure on land, buildings, vehicles and machinery. Inadequate returns and regulatory and taxation pressures remain key barriers to investment, although concerns about demand have eased significantly, falling from a 13-year high.

Key survey findings include:

• Business volumes declined sharply in Q4 2025 (-38%), though firms expect moderate growth in Q1 2026 (+18%).
• Sector sentiment deteriorated for the sixth consecutive quarter (-20%).
• Average spreads were broadly unchanged in Q4 (-2%) but are set to fall sharply next quarter (-30%).
• Non-performing loans held steady (+1%) and are expected to remain stable.
• Profitability dropped at a strong pace in Q4 (-53%) but is expected to edge up in Q1 2026 (+6%).
• Headcount was flat in Q4 (-1%) but is expected to contract slightly in early 2026 (-8%).
• Firms plan to increase IT investment, while cutting back on physical capital expenditure.
• Demand uncertainty fell markedly to below its long-run average (38%).
• More than a quarter of firms (27%) cited ‘other’ investment constraints, including regulation and taxation.

“But there are early signs of stabilisation heading into 2026, with firms expecting a moderate recovery in volumes in Q1 and a renewed focus on investment in digital and IT capabilities to support productivity, resilience, and long-term transformation.

“Recent Budget decisions, including changes to stamp duty for newly listed companies and avoiding a new banking levy, were welcome steps. To turn cautious optimism into sustained growth, the government must now focus on delivery and double down on the Financial Services Growth and Competitiveness Strategy to unlock investment, drive innovation, and reinforce the UK’s global edge.”