THE financial services sector grew at faster rate in the past three months than any time since June 2007 – but the increasing burden of regulation is hitting businesses hard, a CBI-led report warned today.
A poll carried out by the CBI in tandem with professional services firm PwC revealed an increasingly upbeat City with the profitability and volume of businesses improving for the fifth consecutive quarter.
The overall number of people employed in the sector increased for the first time since December 2007 although the banking sector bucked the trend as jobs were slashed.
A total of 37 per cent polled said their volumes had risen in the three months to September while only nine per cent said they fell. The remaining 54 per cent said there had been no change. Banks’ volumes jumped after two quarters of declines and building societies saw the fast rise since March 2008. Meanwhile investment management also saw an upturn with profitability, while finance houses saw a “rapid” rise in profitability.
The proportion of firms who thought markets would deteriorate fell to 10 per cent, highlighting the general mood of cautious optimism, according to the CBI/PwC Financial Services Survey.
CBI chief economic adviser Ian McCafferty said: “Activity picked up in the financial services sector for in the last three months at a pace not seen since the credit crunch.” He said that forecasts had suggested a bigger lift than the report had found but that things were heading in the right direction. However, he said the financial services sector was facing mounting pressure with a tide of new regulation.
His views were echoed by PwC’s UK banking chief Andrew Gray. He said: “While the capital requirement proposals are less stringent than some expected, they do place significant financial demands on the banks – which will have consequences for pricing, business models and strategy.” He added that there were concerns among firms that there was not a “level playing field” and that the City was being clobbered harder, and more quickly, than some financial centres abroad.
10% the number of businesses who thought markets would fall significantly
37% said their volumes had risen in the past three months
9% said their volumes would fall
June 2007 the last time activity in the financial services industry grew at the current rate