UK banks’ spending priorities for the next year are focused on improving IT infrastructure and cyber security, according to a report from the CBI and PwC, which also finds a focus on building new digital platforms to remain competitive and respond to changing customer needs.
The need to increase efficiency and provide new services was the most widely cited IT investment motive in the CBI/PwC survey. Companies reported that they would be focusing their growth strategies on retaining and cross-selling to existing customers, more than acquiring new ones.
This increased IT investment is in contrast to a decrease in staffing in the UK banking sector. 23% of financial services firms said they had increased employment, while 46% said headcount had fallen, driven by the banking sector. This dragged the overall balance down to -24%, marking the second consecutive quarter of falling employment (-9% in the last survey). 26% of firms expect to increase their headcount next quarter, while 39% expect numbers employed to fall, giving a balance of -13%
According to the CBI/PwC survey, the most significant potential barrier to investment is the possibility of inadequate returns. However, despite that, UK firms still plan on increasing their investment in IT by 72% over the next 12 months.
Highlights from the the benchmarking survey are as follows:
- Inadequate net return on proposed investment was cited as the main factor likely to limit investment (71%).
- However, firms still plan to increase their investment in IT (+72%) in the next twelve months, according to the latest Q1 2015 quarterly benchmark survey.
- The main reason for expected capital expenditure authorisation is to increase efficiency/speed (+89%) – the highest since March 2010 (when it was also +89%).
- Regarding their growth strategies for the year ahead, FS firms are placing increasing importance on retaining existing customers (+57%) and cross-selling to existing customers (+51%).
Commenting on the Q1 2015 findings, Rain Newton-Smith, CBI Director of Economics, said: “The overall headcount in financial services fell for a second consecutive quarter, however, driven by banks cutting staff as they make their business operations leaner, refocusing activities as a result of new capital rules and regulatory requirements.
“Firms plan to cut their marketing spend and increase their IT investment over the next year, as they focus on increasing efficiency and selling to existing customers, rather than trying to win new business,” he added.
The full CBI report can be found here.