Many international financial services firms based in Luxembourg are forecasting lower than expected revenues for 2020 and over half plan to cut their operating budgets next year.
The majority (60%) forecast lower revenues and 56% plan to cut their operating budgets in 2021, according to Luxembourg for Finance.
This is the pessimistic finding of a survey of 400 executives at Luxembourg-based financial services firms, 22% of which were from the asset management and fund administration sectors, conducted by the development agency Luxembourg for Finance.
A quarter of the respondents see the operating environment becoming more volatile with major disruptions ahead.
There was some optimism, however. Over half, or 55%, were confident about revenue growth for 2021, although this may be due to likely cuts in operating budgets.
Furthermore, 75% of respondents expect to see no international investment growth in 2021, with 31% even expecting a decrease.
The latest research, which comes as many European countries are imposing a second lockdown, covers the effects of the pandemic and social distancing restrictions, including companies’ reactions to remote working. Luxembourg for Finance found that 75% of respondents intend to retain some element of home working even if restrictions are lifted and if some form of normalcy returns in 2021.
Nicholas Mackel, chief executive of Luxembourg for Finance, said: “Unsurprisingly, most financial services chiefs forecast headwinds, such as continued geopolitical risks, in the short to medium term. 2021 looks set to be challenging with many cutting operating budgets and shrinking their global investments.
“However, it is reassuring to see some considerable confidence about top line growth returning next year. It is also clear that remote working is going to be a lasting legacy of this crisis, which in my view has its pros and cons.”
Mackel also said that 2021 would be a “critical time” for national policy makers, adding that financial services firms would play a vital role in the post-pandemic recovery as well as other policy agenda items like the EU’s Green Deal initiative.
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