CBI survey upbeat on financial services sector

by Gill Montia

Story link: CBI survey upbeat on financial services sector

The Confederation of British Industry (CBI) has published its latest quarterly report which suggests that the UK’s financial services industry is emerging from the worst of the credit crisis downturn.

While the sector experienced falls in both income and profitability in the three months to June, the rate of decline showed signs of easing.

Furthermore, the study revealed that many parts of the UK’s financial services sector expect business volumes to rise in the next quarter, after 21 months of falls.

According to CBI chief economist, Ian McCafferty, firms are more positive about volumes than since March 2007, with 29% predicting an increase over the next three months.

Insurance companies are the most optimistic and banks also expect volumes to rise, although building societies are merely hopeful that income and profitability will stabilise.

Meanwhile, securities traders and investment managers are expecting recent improvements to be short-lived, with falls in volumes likely to resume next quarter.

The CBI expects the UK economy to contract by 3.9% this year before a return to growth of 0.7% in 2010.

It therefore warns that cuts in investment and further job losses are only to be expected, adding that conditions for banks will remain difficult as debt levels continue to rise.