Growth Expectations Rise with AI Investments and Innovation Expenditures, According to Survey by Lloyds Bank
The latest Lloyds Bank Financial Institutions Sentiment Survey presents a strongly optimistic outlook for UK financial institutions' growth and investment in Artificial Intelligence (AI), innovation, and talent over the next five years.
Key points from the survey include:
**Growth outlook:** 83% of UK financial institutions expect their business to grow over the next five years, a significant increase from 55% who expect growth over the next 12 months. This highlights strong long-term confidence in the sector’s prospects.
**Strategic investments:** To achieve this growth, institutions are focusing on expanding in existing markets (46%), investing in emerging technologies such as artificial intelligence (just under 50%), and developing new products and services (37%).
**AI adoption:** AI has transitioned from a future promise to a core business driver, with 91% of institutions now viewing AI as a business opportunity. It is directly enhancing client experience, decision-making, and innovation, positioning AI as central to long-term growth strategies.
**Innovation and talent:** The sector is actively investing in digital transformation, workforce development, and enhancing analytics and data capabilities to sustain growth and competitiveness. This includes a renewed strategic focus on deploying capital effectively.
**Regulatory environment and governance:** While UK banks are advancing AI adoption rapidly—yielding productivity gains, competitive edge, and improved decision insights—they remain cautious regarding incoming AI regulations. Only 9% of bank executives felt well prepared for upcoming AI rules, emphasizing the need for clearer regulatory guidance. Data privacy and model transparency are prioritized to balance innovation with governance.
Overall, UK financial institutions are embarking on a pathway of sustained growth fueled by significant investment in AI and innovation, underpinned by talent development and careful regulatory navigation. This reflects their commitment to long-term transformation and competitiveness amid economic and geopolitical uncertainties.
Lisa Francis, head of institutional coverage at Lloyds, commented on the survey findings, stating, "The survey findings reflect a pivot toward innovation and operational efficiency among UK financial institutions."
The survey was based on responses from over 100 senior leaders across banks, insurers, asset and wealth managers, and financial sponsors. It also shows that 60% of respondents believe the UK will retain its international financial hub status, and 60% recognize that continued reform and investment will be key to sustaining the UK’s leadership position in an evolving global landscape.
Additionally, 37% of firms plan to increase capital expenditure over the coming year, and 37% are developing new products and services to capture evolving client needs and market opportunities. Digital transformation (47%) is a top priority for more than half of the firms, according to the survey. AI applications (37%) are also a significant area of focus for UK financial institutions, as per the survey findings.
In conclusion, the survey presents a positive outlook for the UK's financial sector, with institutions focusing on delivering for clients, investing in people, and embracing new technologies to drive growth and competitiveness in the years ahead.
Financial institutions in the UK are allocating substantial resources towards technology, particularly artificial intelligence (AI), as a strategic investment for growth and innovation over the next five years. This shift reflects a growing recognition of AI as a business opportunity that enhances client experience, decision-making, and innovation, positioning it at the core of long-term growth strategies.
Moreover, the survey demonstrates that technology, specifically AI and digital transformation, is a top priority for more than half of the UK's financial institutions, indicating a commitment to leveraging these advancements to deliver for clients, develop talent, and capture evolving market opportunities.
