The Outlook:

It is difficult to predict the specific state of the UK commercial banking sector in 2023 with certainty, as it is heavily influenced by a variety of factors such as economic conditions, government policies, and technological developments and changing customer needs. However, some trends that are likely to shape the sector in the coming year include:

• Economic conditions: The stuttering economic recovery from the pandemic and the Brexit deal will have a significant impact on the UK commercial banking sector in 2023.
• Low-interest rates: Increase in interest rates and the higher, erratic inflationary environment is likely to continue in 2023, which will impact the profitability of commercial banks.
• Digitalisation: The use of technology in UK commercial banking is likely to continue to increase, with more customers using digital channels to access banking services. Banks will have to adapt their services to meet the growing demand for digital banking.
• Cybersecurity: As the use and influence of technology increases, the risk of cyber-attacks also increases. Banks will have to continue to invest in cybersecurity measures to protect their systems and customers data.
• Regulation: Banks are having to comply with new regulations such as PSD2, Open Banking and GDPR, which will have an impact on their operations and IT systems.
• Environmental, Social and Governance (ESG) issues: Banks are facing increasing pressure to demonstrate their commitment to ESG issues and will be expected to integrate them into their products and services without any caveats being relevant. This will require significant changes in the way banks operate and will also require them to invest in technology and data analysis to support the implementation of sustainable finance practices.
• Open banking: Banks will need to adapt to open banking regulations, which allows customers to share their financial data with authorized third parties, such as fintechs, to access new products and services.
• Competition: The UK banking sector is becoming increasingly competitive with the emergence of fintech firms and the entrance of new players including businesses backed by big technology businesses. Banks will need to adapt their strategies to stay competitive and to continue to offer relevant products and services to their customers.

Size of the UK Commercial Banking Sector:

Whatever level of volatility there may be in the short term, the UK Commercial Banking Sector is one of the major powerhouses of the economy with considerable ability to keep developing and innovating. Looking at the numbers below shows what power the sector has.

• Assets: According to the Bank of England, as of 2021, the total assets of UK banks and building societies amounted to around £7.5 trillion.
• Revenues: According to the Financial Conduct Authority (FCA), in 2020, the UK banking industry generated revenue of £127 billion.
• Market share: The largest commercial banks in the UK by market share are Lloyds Banking Group, Barclays, HSBC, Royal Bank of Scotland (RBS), and Santander UK. These five banks hold around 75% of the UK’s current account market share.
• Number of employees: According to the British Bankers’ Association, as of 2019, the UK banking sector employed around 300,000 people.
• Market capitalization: According to Refinitiv data, as of 2021, the total market capitalization of the largest UK banks is around £200 billion.

In summary we expect there to be a range of headwinds in the first half of 2023 but the sector’s momentum and sheer power continues to press forward, giving opportunities to both well-established organisations, new entrants and entities who offer attractive, customer related products and services.

psd has had a long track record recruiting at senior management and board level in UK Commercial Banking. Our experienced team is well placed to support customers in a range of different specialisations, including front, middle and back-office specialisations.

Please contact Peter Hardy, Managing Director, for further details at peter.hardy@psdgroup.com or call on +44 (0) 207 9700 9701.