According to the EY ITEM Club’s Outlook for Financial Services report, this is the fastest pace of growth since 2007, but still below pre-crisis levels.
Strong growth in consumer and business lending is likely to drive the success of the financial services industry this year the report said, but the sector would be on the look out for reassurance that interest rates will be increased before this time next year.
Consumer spending is forecast to increase by 2.8% and growth in consumer credit is set to run at 5.7% this year, averaging around 4% in the three years to 2019, the report added.
Omar Ali, UK financial services managing partner at EY, said the outlook for finance services this year was “looking positive.”
“2015 was the first year for some time that the underlying economic fundamentals were good enough to support an across-the-board return to growth in borrowing by consumers, home buyers and firms. Despite concerns about the oil price and the impact of a slowdown in China, the outlook for financial services in 2016 is looking positive. If we can plot a course through the policy and politics, 2016 looks set to be a good year,” he said.
“However, the delay in any UK interest rate rise is causing some concern. Until rates rise, banks are going to struggle to increase the gap between lending and savings rates, and the prospect of higher returns for asset managers and insurers is pushed even further out.”