BY Fraser Tennant
The UK financial services sector is on upward trajectory with rising business volumes being reported, according to the latest CBI/PwC Financial Services Survey.
The Survey, which draws on data from the three months to December, shows that, overall, business volumes rose at the fastest pace since the mid-1990s, with demand from UK households and corporates being underpinned by solid growth across many sectors and industries.
“The upswing in growth among financial services firms continues on a solid footing, with overall optimism, business volumes and profits up," said Rain Newton-Smith, Director of Economics at the CBI.
The Survey’s key findings show that: (i) 64 percent of financial services firms said that business volumes were up, while 7 percent said they were down, giving a balance of +57 percent - the strongest growth since December 1996 (+79 percent); (ii) 65 percent of firms expect business volumes to increase, while 6% said they will fall, giving a balance of +59 percent; and (iii) 49 percent of financial services firms said they felt more optimistic about the overall business situation compared with three months ago, while 12 percent said they felt less optimistic, giving a balance of +37 percent.
However, it was also found that building societies were the exception. “Building societies have struggled this quarter, likely as a result of the impact of the Mortgage Market Review, constrained buyer affordability in London and the South East, and stronger competition in the mortgage lending market," confirms Mr Newton-Smith.
Elsewhere, financial services firms reported strong income growth from fees, commissions and premiums in particular. Investment opportunities are also at a premium.
Kevin Burrowes, UK financial services leader at PwC, said “Financial services firms continue to be optimistic, but we will see them investing more to stay ahead of new entrants, deal with technology challenges, meet increasing regulatory and structural reform costs and deliver better results for customers.”
Mr Newton-Smith added “It’s encouraging to see the majority of companies planning to increase their investment spend, especially on IT and marketing, to increase efficiency and to reach new customers as competition and technology change the nature of the sector.”
