The UK financial services sector has high hopes for future profitability, as revealed in the latest CBI/PwC Financial Services Survey, which covered three months to September. It was released today by the CBI, a UK business lobbying organisation.
The survey was compiled by the PwC, a network of firms in 158 countries with more than 180,000 people who are committed to delivering quality in assurance, tax and advisory services.
Optimism in the sector is said to be at its highest for seventeen years, with 59% of financial service companies reporting full confidence in their overall business situations.
There has also been an increase of 24% in employment in the sector as a whole; but rates varied across different sub-sectors. More positions are expected to be available in the next three months, but at a slower rate than in this last quarter. Recruitment is said to have been driven by stronger demand, changing business strategies and regulatory compliance.
However, a surprise fall in business volumes was seen in the quarter, primarily in the banking sector. The CBI said this was due to a fall in business with industrial and commercial companies, as well as overseas customers. Business volumes for private individuals continued to be stable. Despite these results, profitability rose for the fourth consecutive quarter, with companies managing to offset the fall in business volumes by widening spreads. Business volumes are expected to recover strongly in the next quarter and profitability is set to increase further, as costs are likely to fall.
According to the CBI, over the next year 24% of companies intend to spend less on land and buildings, while 12% will lessen spending on vehicles, plant and machinery. However, 53% of firms plan to increase spending on IT.
CBI’s Director of Economics, Stephen Gifford, commented: “With optimism rising and jobs and profitability growing, this is an encouraging quarter for the financial services sector, despite a fall in business volumes in banking.”
He added that: “Financial services companies are less worried than they were about a potential lack of demand, but dealing with regulation is increasingly weighing on plans for business expansion.”