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09 April 2014

Financial services firms confident of increasing demand, jobs and investment.

The volume of business in financial services grew steadily in the three months to March with investment intentions and optimism remaining, according to the latest CBI/PwC survey.

For the second consecutive quarter business volumes grew in all industry sectors except for life insurance, the survey says. However, growth was less than expected, particularly in the banking sector, where there had been expectations of more robust growth.

However, volumes are expected to rise at a stronger pace next quarter across most sub-sectors, with the exception of general insurance or insurance broking.

However, the survey was concluded before the Budget so changes to the annuities market and the Life Insurance sector have yet to be felt.

Overall profitability in the financial service sector continued to grow, but at a more moderate pace than in the previous quarter - the three months to December 2013. Profitability over the next three months is expected to grow at a similar rate as in the first quarter of 2014.

Investment intentions for the next 12 months remain positive, with IT predicted to grow most rapidly, with respondents indicating that the main drivers of increased capital spending were replacement, capacity, and expansion and reaching new customers.

Ian McConnell, PwC partner in Belfast said thesurvey confirmed that the industry is moving on from a post-recession restructuring phase to an investment in technology, customer focus and a response to regulation:

“Across the UK, we’re seeing more emphasis on behaviours and culture, especially within the banking sector, with a growing focus on responding to and anticipating customer needs.

“A recent PwC survey revealed that fewer than half of people in the UK are loyal to the traditional banks with a significant number believing challenger banks are a good alternative.

“However, the basic concept of a trusted institution as a source of finance and a facilitator of transactions is not about to undergo radical change, at least in the short-term.

“The financial services industry, like other key sectors in the economy, is experiencing recovery and seeking to capitalise on it.”

Having expanded at the strongest pace for six years during the three months to December, financial services’ employment grew at a similarly strong rate in the quarter to March.

The sector’s headcount is expected to expand even more rapidly in the next three months; however, after three consecutive quarters of solid employment growth, firms are becoming more concerned that a shortage of professional staff may constrain business growth over the next year.

Taking into account long-run trends, the latest survey results suggest that overall UK employment in financial & insurance activities should rise to 1.16m by the end of Q2 2014, which would leave it 26,000 higher than in the same period in 2013

On this basis, employment would be 56,00 below the all-time peak of Q4 2008, but 58,000 above the trough in Q1 2010, implying that just over half of the ground lost during financial crisis will have been recovered.

Contact details

Email: John Compton

Tel: +44 (0)28 9041 5663