FINANCE - MARKETS

Business climate

Luxembourg for Finance sees optimism in the markets



Nicolas Mackel, CEO of Luxembourg for Finance, is encouraged by the renewed optimism in the overall financial services climate. (Photo: Maison Moderne/Olivier Minaire)

Nicolas Mackel, CEO of Luxembourg for Finance, is encouraged by the renewed optimism in the overall financial services climate. (Photo: Maison Moderne/Olivier Minaire)

Luxembourg for Finance (LFF) in October surveyed 400 European executives and managers in the financial services sector. It found that the general business climate is benefiting from a slight increase in optimism against the backdrop of concerns about geopolitical uncertainties and climate change.

The good news is that business confidence is clearly up on the previous 12 months for more than 60% of respondents. As a tangible consequence, more than half expect their organisation to increase international investments in 2022, 33% more than a year ago.

For an international financial centre, what happens beyond its borders is at least as important as what happens locally.

Thus, it is the "geopolitical" risks that worry the professionals. 79% of them say they are concerned about the loss of influence of the European Union and 77% by geopolitical uncertainties. The next most important issue is climate change, with 77% of financiers concerned about it.

"Increasingly protectionist reactions at national level are seen as a major concern; almost 80% say they are worried about increasing fragmentation within the European single market. This is underlined by the need to move beyond national actions by Member States to focus on an overall European objective. According to the respondents, this could help overcome the loss of competitiveness currently experienced by EU financial players on the global stage," Luxembourg for Finance reports.

In terms of emerging macroeconomic risks, respondents were unsurprisingly concerned about inflation and the formation of speculative bubbles.

The war for talent is still relevant

At a local level, the major concern remains the scarcity of talent for 66% of respondents. 51% of respondents fear that their organisation is not fit to solve the problem, compared to 44% in April this year.

While 60% of professionals are concerned about digital issues, they believe their organisations are up to the challenge. 79% of respondents trust their organisation to meet the challenges of cyber security and 88% of respondents trust their organisation to meet the challenges of teleworking.

Similarly optimistic about the challenges posed by sustainable finance: 71% of respondents trust their organisation to successfully include ESG considerations in their advice to clients, 64% to identify sustainable investment opportunities, and 68% to design sustainable products. "However, the availability of quality sustainability data and the fragmentation of standards remain major concerns for participants, in line with the global trend," notes the LFF.

Finally, while a new wave of covid seems to be spreading in Europe, the pandemic is a concern for only 50% of finance professionals.

"Given the growing macroeconomic challenges and nationalistic voices against the single market, it is essential that EU financial services play their role effectively to finance the recovery in a sustainable and efficient manner. As such, the renewed optimism about the overall financial services climate is encouraging, as finance will have an important role to play in rebuilding the global economy," says Nicolas Mackel, CEO of Luxembourg for Finance.

This story was first published in French on Paperjam. It has been translated and edited for Delano.