Jobs axed as profits of financial services take a dive

Some 9,000 jobs were axed during this period, according to the latest CBI/ PwC survey.

Less than a third of respondents reported a rise in business volumes and nearly a half reported a fall.

The balance of minus 19 per cent is the first fall in business volumes and the first fall in profits since June 2009 when the UK was in its first post credit crunch recession.

Matthew Fell, the CBI’s director for competitive markets, said: “The financial services sector has faced a tough quarter, with sales volumes unexpectedly falling and average costs rising, thus denting profits.”

On a brighter note he said that financial services companies expect to see a recovery in the final quarter of 2012.

“They see this as a blip. They don’t see this as part of a sustained downwards trajectory,” he added.

The report says banking was the only sector to increase profits in the three months to September, with better profits offsetting lower volumes.

Profits in life insurance, general insurance and securities trading all declined, while building societies and finance houses’ earnings were flat.

The overall level of business in the financial services sector was considered to be “substantially below normal”, with a rounded balance of minus 44 per cent reporting falls.

This was the biggest slump since March 2010.

Mr Fell said that in response to the fall in business demand, employment fell for the second consecutive quarter against expectations.

Another 3,000 job losses are expected in the next three months.

The general insurance sector saw business volumes and optimism fall despite expectations of robust volume growth.

More declines are expected in the coming three months.

Mark Stephens, UK insurance leader at PwC, said: “For general insurers, volumes and premiums have declined again, confounding hopes of a sector recovery any time soon.”

Securities traders were among the most pessimistic due to a weak mergers and acquisitions market and a low number of flotations.