Financial sector finding reasons to be cheerful
By Rob Freeman | 16th April 2021
Optimism among financial services firms has improved at the fastest rate since December 2013 despite business volumes stalling.
A survey by the CBI and PWC conducted at the start of last month found business volumes stalled in the first quarter of the year after seeing the strongest growth since June 2017 in the quarter to December.
Growth in building societies, life insurance, insurance broking and investment management was balanced by a decline in volumes in banking with finance houses and general insurance unchanged.
Firms across the financial services sector anticipate volumes will return to growth next quarter.
Respondents also reported continued growth in profitability in all sectors except banking and a faster pace expected in the next quarter.
Employment fell for the fifth consecutive quarter and is expected to continue falling over the next three months, but continuing the slower pace of the last three months.
Investment in land and buildings plus vehicles plant and machinery is set to be cut back again in the coming year.
The number of firms citing uncertainty about demand as a barrier to capital expenditure was the lowest since December 2014.
CBI chief economist Rain Newton-Smith said: "It's encouraging that financial services firms are feeling optimistic about the months ahead, likely warmed by the prospect of a phased reopening of the economy.
"This is clearly driving expectations of a strong rebound in business volumes and profits over the second quarter.
"Firms also have their eye on the future. Covid is continuing to accelerate business transformation, with the role of the office space evolving to facilitate greater hybrid and flexible working."
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