Uk financial services sector sees rapid recovery amid global uncertainty

A surprise boost to the British government as the financial services sector reported a strong recovery in activity at the start of 2026, despite the US-Israel war on Iran that ended the previous year with a gloomy outlook.

Britain's banks and insurers bounce back

A long-running survey by the Confederation of British Industry (CBI) found nearly two-thirds of financial services companies, including banks, insurers, and investment managers, noting an expansion in their businesses - a stark contrast to the negative balance of 38% in December.

This marks the fastest turnaround in the sector's fortunes in 30 years, since December 1996, according to the CBI. The banks' successful argument against tax increases at last year's budget and industry efforts to increase GDP growth have also contributed to the sector's improved outlook.

However, analysts warn that conditions can change rapidly, and the impact of the Middle East turmoil could quickly impact on the improved sentiments noted in the survey. The Bank of England has warned that the war could hit mortgage rates, which could dent demand for loans.

Despite this, the surveyed companies said they expected business to continue growing at a rapid, though more moderate, pace in the next quarter, as they digest the implications of the conflict and volatile market moves.