UK Financial Service Sector Grows Despite Weak Outlook, CBI Says
The UK's financial services industry saw a seventh consecutive quarter of growth, despite continuing concerns over the global economy, according to the Confederation of British Industries (CBI).
The influential trade body released its figures for the three months ending in December 2011, which saw considerable turbulence in financial markets and a great deal of scrutiny over the future of the domestic banking industry. However, 53% of companies surveyed by the CBI saw volumes rise in the quarter, with 24% reporting a fall.
The aggregate rise of 29% is the highest since June 2007, well before the 2009 recession began to bite.“This has been a strong quarter for the financial services sector, with increases in sales volumes and profits showing that the sector’s recovery is on track," Ian McCafferty, the CBI's chief economic adviser, said, in a statement accompanying the report's release.
“But firms are less optimistic, employment is down and investment intentions for next year are weaker, as concerns about the global recovery and ongoing troubles in the eurozone create uncertainty."
Banks in particular saw strong growth in business volumes and income values in the quarter, the report shows. However, the number of people employed in the industry declined, and is likely to continue to do so.
“These latest results show pessimism for the coming months although banks have responded that they have seen high levels of business volumes and income over the recent period," Kevin Burrowes, UK financial services leader at PwC, which co-produced the survey, said. "We anticipate that this pessimism will translate into increasing concern over non-performing loans in 2012."
He added: "Eurozone turmoil, uncertainty in the global economy, UK austerity, weak household incomes, increased competition, significant regulatory changes, and reducing headcount, not to mention the fight for funding, all point to a challenging year for bank management."
The average commissions, fees and premiums paid for services across the sector increased 33% in the quarter, according to the CBI. However, firms see the outlook for 2012 as less positive, with most expecting slower growth, and few prepared to invest at the same rate as in 2011.
Optimism in the sector declined by 24% in the quarter. The dark clouds that remain over the eurozone, which is teetering on the brink of recession, as well as at home, where growth is anaemic and unemployment high and rising.
The first week of 2012 saw some positives, with better than expected data from the services and construction industries, as well as some signs of life in the mortgage market. However, it also saw a resumption of fears over the future of the European single currency.