Optimism grows in financial services sector, says report

Rain Newton-Smith, director of economics, CBI
Rain Newton-Smith, director of economics, CBI
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The financial services industry is more optimistic about the future than at any time in the last 15 months, according to figures from a CBI/PwC survey.

The findings will be welcomed in Yorkshire, which has a large number of professional services firms. The study found that in the three months to March, 59 per cent of firms were optimistic, while nine per cent were less positive, giving a balance of plus 50. It was the highest reading since December 2013.

The report said the improved mood was due to rising profits. It added that financial services firms have been able to generate increasing profits from commissions, fees and premiums, investments and trading.

But the report also said the pace of growth in the industry was the slowest in a year.

Employment fell for a second quarter, weighed down by banks “downscaling their activities”, in contrast to other sectors where employment either rose or was broadly stable, the CBI said.

CBI director of economics Rain Newton-Smith said: “This quarter was a mixed picture for the financial services sector. Firms remained upbeat as profits held up, despite weak growth in business volumes in some sectors, especially banking.

“The overall headcount in financial services fell for a second consecutive quarter, driven by banks cutting staff as they make their business operations leaner, refocusing activities as a result of new capital rules and regulatory requirements.”

The report also found that industry investment in land, buildings and marketing were at their lowest in over two years. Only in IT did the industry expect to increase investment over the coming year.

UK financial services leader at PwC, Kevin Burrowes said: “Banks’ spending priorities for the next year are focused on improving IT infrastructure and cyber security. Growth is seen to come from cross-selling to existing customers and attracting new domestic customers. Banks are also building new digital platforms to remain competitive and respond to changing customer needs.”

The CBI, which lobbies on behalf of British industry, is led by John Cridland, its director general. Mr Cridland is stepping down at the end of this year, after five years in the role. An advertisement for his successor appeared in a national newspaper yesterday.