Optimism in the UK’s financial services sector surged in the three months to September, with firms appearing the most upbeat about their overall business situation for almost 17 years, according to the latest CBI/PwC Financial Services Survey.
Employment grew but business volumes fell unexpectedly (mainly in the banking sector), with the decline driven by falling business with industrial and commercial companies and overseas customers.
Nevertheless, profitability rose for the fourth consecutive quarter as firms managed to offset the fall in business volumes by widening spreads.
Looking ahead, financial services firms expect to add more jobs in the next three months – stronger demand, changing business strategies and regulatory compliance were identified as major drivers of recruitment.
Commenting on the banking sector in partiuclar, Kevin Burrowes, PwC’s UK financial services leader, said: “Banks’ optimism is increasingly buoyant despite seeing a slight seasonal blip in commercial and industrial volumes.
“Activity and profitability are expected to grow as the economy recovers, and investment in new products and infrastructure is increasing.
“Regulation continues to be the sector’s greatest source of uncertainty, particularly as UK macroeconomic concerns start to fall away.
“We expect the full effect of the UK’s economic recovery to be reflected in bank performance in the coming months, and their solid profitability is supported by predicted cost reductions and increasing focus on growth.”