'Real turnaround' in financial services

Oct 07 2003 by Brian Amble Print This Article

A ‘real turnaround’ is underway in the financial services sector with confidence returning, business growing at its fastest rate since last summer and job shedding coming to an end.

This optimistic message is delivered in the latest quarterly survey of the financial sector by the CBI and PricewaterhouseCoopers. Confidence improved more than at any time in the last four years, it says, and “a broad-based recovery has now taken over from the sharp downturn of the winter and spring”.

Almost half (47 per cent) of firms said they were more optimistic about the business situation than three months ago, with only seven per cent less optimistic. The balance of plus 37 compares with plus eight in the previous survey and is the best since June 1999.

Growth in business volumes was also better than expected and hit the fastest rate of growth since June 2002. Expectations for the next three months are the strongest since December 1999.

And for the first time in two and a half years, more firms said business was above normal than below. A balance of plus ten in this survey compares with minus ten in June.

With the exception of the life insurance sector, prospects are also looking up for employment. Although jobs were cut over the past three months - with life insurers and fund managers bearning the brunt - losses were less severe than the previous quarter.

Looking forward, more financial services companies expect to increase employment over the next three months than expect to reduce it, the first increase in over a year. Building societies and finance houses are expected to see the biggest rises in recruitment, but the squeeze is expected to continue in life insurance.

Ian McCafferty, CBI Chief Economist, said: "A second successive healthy survey suggests the recovery in financial services is taking hold and the industry is going into winter this year much more optimistically than it did in 2002. That reflects the continuing stock market recovery and the improved outlook for the global economy.

"The first expected increase in financial services employment for more than two years and the end of the downward slide in expected IT investment are further indications that a real turnaround is underway."

John Hitchins of PricewaterhouseCoopers added that the return of private investors to the market was another important signal of the recovery.