A recent survey conducted by Lloyds Bank, among the leading financial institutions in the United Kingdom, revealed that economic growth next year would not be as robust as previously expected.
Indeed, 70% of banks and other institutions say that the adverse effect of soaring inflation will be most keenly felt by the country’s economy next year. 63%, however, disagree and say that the rapid rise in the cost of living may significantly hamper any economic growth.
Based on the Financial Institutions Sentiment Survey, only 7% predict visible economic improvement – a shocking drop compared to the 88% of optimistic respondents from the 2021 survey. Likewise, only 12% of respondents feel that there will be improvements in the financial services sector, another drastic drop compared to the 51% registered last year.
A Significant Increase in Tech Spending
About specific growth areas within the financial sector itself, many financial institutions expect to spend significantly more next year on technological innovation, particularly the improvement of institution-wide automation and digitalization. Indeed, it is likely that tech spending among banks and other institutions will hit around $12.56 billion by the end of this year and grow to around $16.33 billion come 2026.
As a result, while some institutions have defrayed much of the cost of needing to buy new equipment through long-standing tech investments, many companies feel that their operating expenses will rise by as much as 75% in the coming year.
Much of the money spent on office automation technology has involved improvements to the core systems of numerous banks, explicitly focusing on investing in the cloud, payment systems, machine learning and AI-driven technologies, and APIs. That said, 72% of institutions surveyed feel that their current tech improvements are insufficient. They may also invest in newer systems to improve operational efficiency.
But technology isn’t the only priority area for bank spending. Employee hiring, training, and retention are seen as a worthwhile investment of around 43% of the companies surveyed, and recent layoffs in the tech sector mean that the field is full of tech workers who can play key roles in bringing a number of banks up to speed in terms of innovation.
Sustainability is another area of concern. It poses a challenge for numerous banks, many of whom remain hard-pressed to meet their net-zero goals. The lack of clear guidelines regarding green banking is said to be one of the prime factors leading to this.