THE SECOND quarter saw strong business volumes and falling operating costs for financial services, despite little growth in salaries, according to a report released today.
Research conducted by the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC) indicated a strong performance over the last three months and higher optimism for the quarter ahead.
Although there was positive news in many elements of the business, income from services is still relatively sluggish. A balance of only two per cent of respondents said that commissions, fees and premiums had risen between April and June.
In the banking sector specifically, very high confidence for the upcoming months was recorded. Optimism is dramatically higher than it was three months earlier, with the biggest improvement in outlook for over 13 years seen. March 2000 was the last time a larger upswing in expectations was seen. Life insurance stood out as the single part of the sector that has seen smaller business volumes, and where business optimism is sliding.
Stephen Gifford, director of economics for the CBI, said: “Despite a fall in average costs, profitability has been dented by stagnant fees, commissions and premiums. But with business volumes continuing to grow and costs predicted to fall again, profits should rebound next quarter”.
The research also drew attention to the expected cost of regulation and legislation in the year ahead. A net balance of 72 per cent of the industry thinks that their capital spending will increase to respond to new strictures, higher than any other reason.
Firms will be hoping to establish relationships and a closer understanding of the new Prudential Regulation Authority, and the Financial Conduct Authority, both of which were launched in the last quarter.