Financial Services Leaders Cite Geopolitical Concerns Amid Slumping Profit Confidence

LONDON, United Kingdom — Confidence in profitability among leaders in the financial services sector has declined as geopolitical tensions intensify. A recent survey by KPMG reveals that the number of leaders expressing confidence in profitability fell from 94% in the first quarter to 89% in the second quarter of 2025. This dip comes amidst expectations that geopolitical events will increasingly impact revenues over the next five years.

The KPMG UK Financial Services Sentiment survey, which consulted over 150 leaders in the industry, maintains that overall optimism regarding business growth remains strong, with approximately 90% of respondents feeling positive about growth prospects for Q2 2025. This optimism marks a slight increase from the previous year, where 87% reported confidence in the same quarter.

Despite the optimism about growth, leaders are expressing heightened concerns regarding various economic pressures. The survey found that 48% of leaders are worried about inflation pressures, followed closely by 41% who are concerned about rising interest rates and 36% about cost pressures. Geopolitical risks have surfaced as a significant challenge, with nearly 30% of respondents identifying it as a top concern for their businesses this quarter.

In response to these heightened risks, 60% of leaders indicated they are allocating more of their total revenues towards risk-proofing measures against geopolitical events, with expectations to invest, on average, 8% of their total revenues this financial year. This investment percentage is projected to increase to 10% by 2030. Furthermore, 28% anticipate investing over 15% of their revenues by 2030 in areas such as business continuity planning and cyber resilience.

“We are in the most volatile geopolitical and economic environment since 2008,” stated Karim Haji, Global and UK Head of Financial Services at KPMG. “While it’s encouraging to see that most leaders maintain a positive short-term outlook, supported by growth in the services sector reported in March, the volatility is putting pressure on revenues, suggesting this may be a long-term trend.”

Haji highlighted that the fragile geopolitical landscape represents the most significant threat to future growth and lower inflation, advising that the focus of investment is transitioning from efficiency to resilience.

In a positive turn, confidence in the UK Government’s plans to stimulate growth in the financial sector has increased sharply. The survey indicates a 15% rise in confidence regarding the Chancellor’s initiative to ‘regulate for growth’ and establish a Financial Services Competitiveness Strategy. Currently, 85% of leaders express confidence that these plans will enhance growth and competitiveness, a notable increase from 70% in Q1.

Leaders also signal optimism that government initiatives will attract foreign investment and bolster the UK’s stature in sustainable finance and fintech. However, some leaders retain skepticism, particularly regarding budget decisions such as potential tax increases and other economic factors that could impact growth.

Looking ahead, about 80% of financial services leaders express confidence that the UK can maintain its position as a global financial hub over the next three years, with 60% believing that the UK is more attractive to investors today than it was five years ago.

Haji concluded, “While reduced regulatory complexity is welcomed, we must be cautious about reversing regulations that protect the stability of our financial system, particularly given global volatility. Clarity from the Government on the Chancellor’s plans will be essential for leaders as they navigate these challenges and strive to solidify the UK’s position as a leading financial center.”