Partner Article

Signs of life in financial services sector

Activity in the UK financial services sector was broadly stable over the past three months with the situation set to get better in next three months, a new survey has found.

The profitability of financial services businesses improved for the third quarter running, and is expected to increase further in the coming three months, according to the latest CBI/PwC Financial Services Survey. Concern about legislative burden is at an all time high in the industry, however, with spending on compliance expected to rise sharply over the next 12 months. Asked how their business volumes fared in the three months to March, 43% said that volumes rose and 42% said they fell.

The resulting balance of +1% is better than the expected -13%. In the next three months, a balance of 48% of firms expects a rise in business volumes, which is the most positive expectation since March 2006 (+58%). While banks and security traders saw business volumes fall in the past three months, both sub-sectors now expect volumes to increase in the coming quarter.

Meanwhile, building societies and life insurers experienced unexpectedly strong growth. Across the different customer groups, business with private individuals grew (a balance of +5%), while lending to industrial & commercial companies continued to fall (-9%).

Volumes of business with overseas customers rose at the fastest pace (+14%) since September 2007 (+17%), and a record expectation was recorded for the coming three months (+27%). Ian McCafferty, the CBI’s chief economic adviser said: “Activity in the financial services sector held steady in the last three months, and there are signs of better things to come.

“However, the picture remains mixed. Business grew in some areas, such as building societies, and fell in others, such as banking. Lending to private individuals rose a little, but lending to companies was down. “Financial services companies hope lending will grow across their customer base over the coming quarter, lifting business volumes and helping profitability.

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