Britain’s financial services industry is recovering from the global banking crisis, with profits rising and companies optimistic that growth will pick up strongly this year. However, volumes are broadly flat, which suggests that the improvement is coming from efficiency and cost-cutting measures rather than a surge in new business.
A report from the Confederation of British Industry (CBI), a business leaders’ group, and PricewaterhouseCoopers (PWC) highlights concerns about the industry’s legislative burden, which is at an all-time high, with spending on compliance expected to soar.
“Activity in the financial services sector held steady in the last three months, and there are signs of better things to come,” CBI chief economic adviser Ian McCafferty said. “However, the picture remains mixed.”
Business grew among building societies, but fell in banking. Lending to private individuals rose a little, but lending to companies was down.
“Fears that regulation will hamper growth prospects in the year ahead have reached a record high, with companies expecting to have to ratchet up spending on compliance sharply,” the report warned.
“Banks’ confidence is continuing to rise amid predictions that business volumes will show the sharpest increase for three years,” said Andrew Gray, UK banking advisory leader at PWC.
“Commercial business has been weak during the quarter but, for the first time in two years, activity is now expected to pick up and demand from financial and overseas customers is also predicted to be an area of growth. However, retail activity remains an area of concern,” he said.
In the three months to March, 43 percent of companies surveyed said that their business volumes rose and 42 percent said they fell. The resulting balance of 1 percent is better than the expected negative 13 percent.
In the next three months, 48 percent of firms expect a rise in volumes, the most positive outlook since March 2006.
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