Outlook shaky for financial services jobs

2005

Britain's financial services firms expect to shed jobs over the next few months at the fastest rate for two years.

The latest quarterly survey of the industry by the CBI and PricewaterhouseCoopers has found that despite optimism rising as business volumes returned to growth, many firms are planning job cuts to keep their costs down.

The number of people employed in financial services fell for the second quarter in a row at the end of 2004 and the rate of decline is expected to intensify.

The balance of minus 13 per cent for the last three months represents the fastest rate since September 2003 but a balance of minus 26 per cent expect to cut jobs over the next quarter, the weakest expectation for employment since December 2002.

According to John Hitchins, UK Banking Leader at PricewaterhouseCoopers, life insurers and banks are expected to make the most cuts while finance houses and building societies will create jobs at the fastest rate.

"The strong performance experienced by financial services firms in the first half of 2004 is unlikely to be repeated at the beginning of 2005," he said. "Sectors with significant personal lending businesses had the most pessimistic outlook.

"The recent reduction in headcount is expected to intensify in the banking, fund management and insurance sectors and all sectors expressed concerns about the level of demand affecting growth this year."

Overall, the report found that one in five (20 per cent) of companies said business volumes were down while more than a quarter (27 per cent) said they were up. The balance of plus seven per cent is an improvement on the minus 14 per cent of the September 2004 survey, but well down on the plus 44 per cent recorded last June.

Ian McCafferty, CBI Chief Economic Adviser, said: "Like other sectors of the economy financial services picked-up after a poor August and September. With oil prices having slipped back from their peak and interest rates likely to be stable for the time being some of the headwinds from the wider economy earlier in the year have diminished.

"This in turn is helping financial services, though only to a limited extent. The sector had a very strong run up to the middle of last year. That isn't coming back in the immediate future."

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