Financial services leaders offer gloomy outlook as European lockdowns return

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The continuing economic fallout stemming from Covid-19 restrictions has prompted financial services leaders to lower their revenue expectations for 2020 and prepare to cut operating budgets ahead of a challenging 2021, according to a new snap poll organised by Luxembourg for Finance.

Following on a survey conducted in May 2020, Luxembourg’s development agency for the financial services industry, in October, 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. With one quarter of respondents seeing the operating environment becoming more volatile and major disruptions ahead, the results revealed that 60 per cent are now forecasting lower than expected revenues for the end of 2020, while 75 per cent of respondents expect to see no international investment growth in 2021, with 31 per cent even expecting a decrease.

In one bright spot in their outlook, 55 per cent of respondents said they were “rather confident” about revenue growth next year, with a further 9 per cent purporting to be “absolutely confident”. This could however be linked to the fact that over half (56 per cent) plan to reduce their operating budgets for 2021
The survey also asked how companies are embracing new ways of working given ongoing social distancing measures and stay at home requests from governments. Asked what they would do if restrictions were lifted and the situation normalises in 2021, nearly three quarters (74 per cent) said they would continue with some sort of remote working approach for at least one day a week. 32 per cent said they would allow two-three days per week if possible.
Commenting on the survey, Nicolas Mackel, CEO of Luxembourg for Finance, says: “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, it is reassuring to see some considerable confidence about top line growth returning next year. 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.
“This is a critical time for national policy makers. 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.”