Continued recovery of the UK’s economy is starting to take effect in the financial services sector, the Confederation of British Industry (CBI) revealed on Monday with the release of the latest survey conducted by CBI and PwC, a professional services firm.
The CBI/PwC Financial Services Survey is a quarterly trends report that examines the health, perceptions and plans of the UK financial services industry. The most recent survey covers the three months to December 2013 and was conducted with 87 respondents between 18 November and 5 December 2014.
According to the report, profitability in the financial services industry rose for the fifth consecutive quarter, with 69% of financial services firms said they felt more optimistic about the overall business situation. Optimism was the highest recorded since the survey was initiated in 1989. Growth in business volumes was shown to have strengthened across all customer categories, apart from financial institutions where volumes were flat. There was also a marked increase in business for industrial and commercial companies during the last quarter and it is anticipated that business volumes and profitability will increase again in the next quarter.
Employment grew at its fastest pace since 2007, increasing by 10,000 in the fourth quarter of 2013, the strongest since the survey began, the data showed. It also revealed that, based on the latest CBI/PwC survey figures and a historical relationship with ONS workforce jobs data, employment is expected to continue growing, rising to 15,000 in the first quarter of 2014. Employment in the sector is estimated to be 1.16m in the first quarter of 2014; however that figure is 52,000 lower than the same period in 2008.
Capital spending intentions for the next 12 months is indicated as positive for all financial services categories, with firms being less concerned about the impact of the level of demand and regulation on business in next twelve months, skills shortages and the capacity of their systems to deal with new business and stronger competition.
Matthew Fell, CBI Director for Competitive Markets, commented: “As the recovery takes root in the wider economy, it is beginning to feed through to financial services firms. Things are starting to look more ‘normal’ after five years of volatility. “All the key indicators – optimism, business volumes and profitability – are up. But it’s particularly encouraging to see longer term confidence indicators like marketing spend, employment and investment spend also rising strongly. “It’s also telling that financial services firms are now less worried by levels of demand and regulation and are instead concerned about a skills crunch, their systems capacity and stronger competition.”