Financial services beginning to feel effects of improving economy as jobs surge – CBI
THE financial services sector is beginning to feel the benefits of the improving economy, a new survey by the CBI and PwC has concluded.
The survey covers the three months to December and shows optimism rose at its fastest rate since the survey began in 1989, as profitability rose for the fifth consecutive quarter.
Business volumes growth was strong across all customer categories, with the exception of financial institutions where they were flat. There was a notable pick-up in business with industrial and commercial companies.
Both business volumes and profitability are expected to increase again next quarter.
The CBI/PwC Financial Services Survey also shows that employment grew at its fastest pace since 2007 and expected employment growth for the first quarter of 2014 is the strongest since the survey began.
Based on the latest CBI/PwC survey figures and their historical relationship with ONS workforce jobs data, the CBI said it estimated that financial services jobs increased by 10,000 in the fourth quarter of 2013 and were set to rise by a further 15,000 in the first quarter of 2014. That would take employment in the sector to 1.16m in Q1 2014 (52,000 lower than Q4 2008).
Firms’ capital spending intentions for the next 12 months are also said to be positive across all categories for the first time since the financial crisis.
Companies are now much less concerned about the impact of the level of demand and regulation on business in the year ahead, and more mindful of skills shortages, the capacity of their systems to deal with new business and stronger competition.
Matthew Fell, CBI Director for Competitive Markets, said: “As the recovery takes root in the wider economy, it is beginning to feed through to financial services firms. Things are starting to look more ‘normal’ after five years of volatility.
“All the key indicators – optimism, business volumes and profitability – are up. But it’s particularly encouraging to see longer term confidence indicators like marketing spend, employment and investment spend also rising strongly.
“It’s also telling that financial services firms are now less worried by levels of demand and regulation and are instead concerned about a skills crunch, their systems capacity and stronger competition.”
Kevin Burrowes, PwC’s UK financial services leader, added: “Banking sentiment continues to improve strongly, mirroring the UK economic rebound. We hope that as trust is earned and rebuilt over time, banks will increasingly be recognised positively for their role in society and their contribution to the UK economy.
“The sector is enjoying growing revenues and volumes of business. Profitability is increasing too. The sector’s confidence is illustrated by its rising headcount, a striking reversal from one year ago, and fewer respondents are concerned about demand than at any point since the financial crisis.
“The survey suggests that the sector is also beginning to get to grips with its regulatory agenda. Regulation is seen as a lesser obstacle to growth than before, and regulatory spending is growing more slowly. There is no question that compliance remains a major concern, but it is slightly less all-consuming than it was.”
