Optimism is increasing for finance firms
CONFIDENCE in the prospects for the financial services sector has risen for the first time in two years, with many parts of the industry expecting business volumes to rise in the next quarter, according to a study published today.
But the latest Financial Services Survey by the Confederation of British Industry (CBI) and PricewaterhouseCoopers shows that banks remain under pressure, with the fastest falls in the rate of business volumes since March 1991.
Just 1 per cent of respondents believe that there is a risk of financial markets deteriorating further, compared with 45 per cent in March.
In the sector as a whole, the three months to June saw levels of business, income and profitability fall at a much slower pace than earlier this year, though differences between the sectors remain.
“Having seen business volumes tumble continuously for 21 months, some parts of the financial services sector look like they may be starting to come through the worst,” said CBI chief economic adviser Ian McCafferty.
Looking to the next quarter, firms were the most upbeat since March 2007 on business volumes, with 29 per cent expecting a rise and 18 per cent anticipating a drop, giving a balance of +11 per cent. Insurance companies were the most optimistic and building societies – which have experienced tough conditions since early 2008 – are now hopeful that business will stabilise in the next quarter.
But securities traders and investment managers expect the recent improvement in their business to be short-lived, with volume declines expected to resume next quarter.
Nearly all firms agreed that it will take longer than six months for normal market conditions to resume and 70 per cent said they thought the UK had become less competitive as a financial services centre.