Optimism in sector as it makes return to growth
Activity grew strongly in the three months to March, with a robust rise in business volumes and an increase in profits. Profit growth was driven by an increase in income from fees, commissions and premiums, but the pace of growth was slower than expected.
The CBI said this was partly due to a surprise rise in costs, particularly staff costs, following an unexpected rise in employment.
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Hide AdFinancial services companies said they are more optimistic about their overall business situation with volumes and profits both expected to grow in the next quarter.
However, the CBI said that regulation and compliance costs are likely to remain a drag on business.
Matthew Fell, CBI director for competitive markets, said: “This has been a strong quarter for the financial services sector, with robust growth in business volumes, an increase in profitability and upbeat investment intentions.
“Concerns over the lack of availability of professional staff have eased since January and overall employment rose unexpectedly this quarter.
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Hide Ad“But recent problems in Cyprus risk reigniting concerns about eurozone stability.
“At the same time, regulation and compliance are still likely to be significant drags on business throughout this year.”
Nearly half (48 per cent) of firms said business volumes increased while 17 per cent reported a fall, giving a balance of +32 per cent
Business volumes grew in all customer categories with industrial & commercial up 20 per cent, financial institutions up 12 per cent, private individuals up 16 per cent and overseas customers up eight per cent.
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Hide AdNearly 40 per cent of firms expect business volumes to increase during the next quarter while 12 per cent expect them to fall, giving a balance of +27 per cent
Steve Davies, PwC partner, retail & commercial banking, said: “The banks’ return to confidence continues, although the improvement is less marked than in the previous quarter. Business is expected to improve across retail, commercial and financial segments and headcount has begun to grow again.”