The financial services industry is a bedrock in the corporate world, one that covers a wide variety of service providers under a broad umbrella. Incorporating everything from insurance to loans, financial services are required not only by individuals but also across the corporate world, and a lot of businesses rely on these service providers to keep them running smoothly and efficiently. How has the financial services industry performed in 2020?
It’s fair to say that everyone from insurance agents to the major world banks has had a year to forget in 2020. The reason we all know is the disruption caused by the worldwide covid-19 pandemic. This has forced many of the major world financial centers to implement partial closedowns, with staff being asked to work remotely. The sudden shock to the system, and the effect of this and other factors relating to the pandemic on the world economy, has led to a world facing recession perhaps more serious than has been seen for many decades. Let’s talk some more about the problems the industry has faced in the past year.
Problems Facing the Financial Services Industry
The sheer scale of the pandemic meant wholesale changes for most areas of industry and commerce, with the financial services industry among those that took a hard hit. There have been a number of problems that faced the industry. One was the sudden halt of international flights to and from countries where the virus was prevalent. This immediately affected the airlines, who found themselves with no business, as well as investors in the airline industry.
The knock-on effect hit the travel industry, which found itself with no products to sell as travel was – for the most part – curtailed by law. The insurance industry also hit a standstill, with many insurers withdrawing policies for international travel as they are unsure of the future problems with covid-19. The financial markets took hits, too, although not to the extent that many had expected. This collection of news and information from the Financial Times may help understand the overall problem and give an informative view.
The Housing Market
One notable problem area has been the housing and property market. In many countries people have been forced to stay off work for prolonged periods. Some have been furloughed while others may have been laid off. Anyone in this situation who had previously been thinking of moving to a new house would naturally put things on hold, leading to a stalled property market in many countries.
Mortgage lenders began withdrawing products from the market as the uncertain future of many customers became obvious. However, government help in some countries – in the UK, for example, a ‘stamp duty holiday’ was put in place reducing the amount of property tax in transactions under £500,000 – saw a mini-boom the market, although sales remain low. With no options to view houses there would be fewer sales than normal, hence any financial service providers serving the property market would suffer.
It should be said, however, that in the face of the coronavirus pandemic the financial services industry across the world has weathered the storm quite well. Trade is down, naturally, and investment no stocks, shares and projects has stalled to some extent, yet the world of finance is a strong and established industry that is used to ups and downs.
There were a couple of further complications in the Western markets that have had an effect on currency exchange rates as well as the economy in general. The first concerns the USA where the election saw Donald Trump lose to Joe Biden in what was a bitter public bout. The upshot of this on the US economy is yet to be felt as much will be shrouded by the coronavirus pandemic, but there are expected to be consequences in 2021 and beyond.
In Europe, the ongoing ‘Brexit’ negotiations – in which the United Kingdom is leaving the European Union and neither side can agree terms – has an ongoing effect on the pound and its relation to other currencies, and once again the future ramifications of Britain leaving the EU are uncertain, but sure to have an effect financially and on the markets.
The Outlook for 2021
There is a lot of uncertainty regarding the outlook for the financial services industry in 2021, and indeed beyond. The world is a long way from emerging from the covid-19 crisis, as the virus continues to spread in many countries and successful vaccines are sought, so all we can hope for is that the many players in the financial services industry keep on as they are in the face of adversity. A long and difficult road ahead awaits, there will be casualties, and perhaps we will revisit this subject in a year’s time and compare notes.