FS sector navigates a challenging year-end, but brighter 2026 expected – CBI Financial Services Survey

Business volumes in the financial services sector continued to fall at a rapid pace in the final quarter of 2025, according to the latest CBI Financial Services Survey.

Additionally, profitability declined at a sharp rate over Q4. The falls in business volumes and profitability are likely to have contributed to a deterioration in firms’ sentiment in the three months to December.

The quarterly survey, conducted between 20 November and 9 December 2025, also found that FS firms expect trading conditions to improve somewhat in Q1 2026, with volumes and profitability growth set to recover. Headcount is anticipated to decline slightly, after being flat in Q4. Investment intentions for the year ahead remain mixed. Firms plan to increase spending on IT while reducing capex in land & buildings and plant, vehicles & machinery.

Key findings:

• Business volumes continued to decline at a rapid pace in the quarter to December 2025 (weighted balance of -38% from -36% in September). However, firms expect that volumes growth will recover moderately over Q1 2026 (+18%).
• Sentiment amongst FS firms deteriorated in the three months to December, marking the sixth quarter in a row of falling and/or flat optimism (-20 from +3% in September).
• Average spreads were broadly flat in the quarter to December (-2% from -47% in September) but are set to decline at a strong rate over Q1 2026 (-30%).
• The value of non-performing loans remained broadly unchanged in the quarter to December (+1 from -1 in September) and is expected to stay flat next quarter (+1%).
• Profitability declined over Q4 2025 at a sharp rate (-53% from -13% in September). FS firms expect profitability to recover modestly over Q1 2026 (+6%).
• Headcount was broadly unchanged over the quarter to December (-1% from -24% in September) but is set to decline slightly over the next three months (-8%).
• FS firms expect to increase investment in IT over the next twelve months (compared to the previous twelve), to the greatest extent since September 2023. Capital expenditures on land & buildings and vehicles, plant & machinery are expected to decline to a slightly greater extent than the previous quarter.
• Inadequate net return was the most commonly cited factor expected to limit investment over the year ahead (45% from 42% in September; long-run average of 51%).
• There was a notable reduction in the share of firms citing uncertainty about demand, dropping from a 13-year high in the previous quarter to below its long-run average (38% from 69% in September; long-run average of 48%).
• Just over a quarter of firms cited ‘other’ factors as likely to limit investment (27% from 26% in September; long-run average of 8%), with comments continuing to point to challenges arising from taxation and regulation.

Louise Hellem, CBI Chief Economist, said:

“Financial services firms reported a gloomy end to 2025, with sentiment deteriorating amid persistent falls in business volumes and profits. 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.”