British banks, financial-services companies and insurers may cut as many as 15,000 jobs in the first quarter to reduce costs amid a decline in business confidence, the Confederation of British Industry (CBI) said.
“We expect an intensification of job cuts going forward,” CBI chief economic adviser Ian McCafferty told reporters in London, citing a new survey of financial companies. “Sharp falls in activity and profitability in the fourth quarter illustrate the profound troubles of the financial sector.”
Revenue and profitability in the financial-services industry fell at a record rate in the fourth quarter, as about 10,000 jobs were lost and business confidence declined, the CBI said. The Bank of England has slashed its key interest rate to the lowest since it was formed in 1694 to prevent a recession from deepening amid the global financial crisis.
“An increasingly aggressive approach to cost cutting is likely,” said John Hitchins, the British banking leader for PricewaterhouseCoopers LLP, which conducted the survey with the CBI. Banks’ bad loans increased more than expected in the fourth quarter, while commission and fee income had its fastest reduction since the survey began in 1989.
Banks and building societies expect a fall in new loan approvals in the coming three months. A record 41 percent of companies said a shortage of finance will limit capital expenditure and about 86 percent said it would take six months before normal financial market conditions resumed.
“Interest rates are not a silver bullet to tackle the core problem of credit” availability for companies, CBI Deputy Director General John Cridland said. “Credit is the No. 1 issue.”
The CBI surveyed 87 financial-services companies, including banks, building societies, insurers, brokers and fund managers between Nov. 24 and Dec. 3.
The CBI represents about 240,000 companies that employ one-third of the private sector workforce.
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