UK Financial Services Sector Slowing Down, Says CBI Survey

The UK financial services sector has seen growth in business volumes slow sharply over the past quarter, according to the Financial Services Survey published by the CBI and Price Waterhouse Coopers. The survey found that the past quarter saw income

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The UK financial services sector has seen growth in business volumes slow sharply over the past quarter, according to the Financial Services Survey published by the CBI and Price Waterhouse Coopers.

The survey found that the past quarter saw income fall for the first time in two years, profitability growth flatten, and recruitment slacken – broadly as expected in June.

From July to September, growth in business volumes slowed sharply, as 28 per cent of firms said volumes had grown and 26 percent reported a decrease, a net balance of 2 percent, representing near-flat growth. This was in line with expectations, but was a marked contrast to June’s balance of 44 per cent, and ended a year of consistent growth.

The survey, which has been conducted since 1989, showed the slowdown in overall growth was driven primarily by weaker business with private individuals and financial institutions. In the case of private individuals, the balance of minus 4 percent represented the first decline in business since December 2004. Similarly, both categories of income fell for the first time in two years. Fee, commission and premium income recorded a balance of minus 11 percent.

Over the next year income and business volumes are expected to recover and profitability to strengthen, but modest job cuts are expected and spending plans have been scaled back.

“After a year of solid growth, the slower growth in business volumes in this sector is disappointing, even if expected,” says Richard Lambert, the Director-General at CBI. “Thankfully it seems to be a temporary lull, and next quarter’s forecast recovery is heartening, with volumes and profits returning to the rates of growth enjoyed for much of the past year.”

“Last quarter’s dip in confidence has proved to be short lived,” adds John Hitchins, the UK banking leader at Price Waterhouse Coopers LLP. “Despite disappointing levels of business in several sectors during the quarter, most areas of the financial services industry remain positive in their outlook and most are predicting future growth in volumes of business.”

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