British banks fear their fragile recovery will grind to a halt over the next few months, a survey by employers’ organization the Confederation of British Industry (CBI) showed.
Growth in Britain’s financial services industry was lower than expected toward the end of last year, the quarterly study by CBI and PricewaterhouseCoopers showed.
Banks and building societies warn that an increase in retail and corporate banking lending over the next six months will be choked off by March, leading to cuts in income and profits.
“Firms do not expect growth in business volumes to continue over the coming three months and do not anticipate improving profitability, despite further cost reductions,” the CBI said.
Asked how their business volumes fared in the three months to last month, 32 percent of institutions said volumes rose, while 28 percent said they had fallen.
The resulting balance of plus 4 percent is lower than September’s figure of plus 7 percent.
“The bounce in UK financial services activity over the past six months is not expected to last as we enter 2010,” CBI chief economic advisor Ian McCafferty said.
“Firms see their business volumes falling back again, with no further improvement in profitability over the next three months,” he said.
Banks are the worst-hit, fearing they will see business volumes drop back to the lows of last year, when the global financial crisis was biting hard.
They pointed to a number of factors, including a flight of savers’ money from the “safe haven” of major banks to investment products in search of higher interest returns and to take advantage of a rising stock market.
The CBI did, however, see some encouraging signs.
“On a more positive note, financial services firms’ confidence in the general business situation has continued to increase, profitability improved and a much slower reduction in numbers employed was seen in this survey,” McCafferty said.
“Job losses are also expected to be minimal in the coming quarter,” he said.
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