Member Article

Optimism returns to financial services

The financial sector is showing signs of returning optimism, the latest survey from the CBI suggests.

The CBI’s Financial Services Survey shows that many parts of the sector in the UK expect business to improve over the next three months. The firms’ optimism about the overall business situation has risen for the first time in two years.

But the CBI warned that while demand might pick up in the coming months, firms remain under pressure. The organisation went on to predict “significant job losses and cuts to investment”.

Asked how their business volumes fared in the last quarter, 22% said they rose, while 50% said they fell. Looking ahead to the next three months, firms are the most upbeat since March 2007 on business volumes with 29% expecting a rise and 18% anticipating a drop.

Ian McCafferty, CBI Chief Economic Adviser, said: “Having seen business volumes tumble continuously for 21 months, some parts of the financial services sector look like they may be starting to come through the worst. The pace of decline in incomes and profitability is slowing, and business volumes are expected to rise in the next quarter.

“However, conditions remain challenging, particularly for the banks. Although demand looks like it is beginning to recover, it is doing so from a very low base. We can still expect lower profitability, significant job losses and cuts to investment in the coming months. The rising levels of bad debt are a further worry for the industry.”

The report also said that a sustained recovery in the banking sector was not yet on the cards, as bad debt in the recession and the impact of new regulation remained in focus.

This was posted in Bdaily's Members' News section by Ruth Mitchell .