Positive growth in financial services according to report

The financial service sector has seen a boom in business volumes and profits according to a recent survey which has reported a dramatic rebound in the last three months.

However the pace of growth has been slower than expected due to an unexpected increase in employment, resulting in rising staff costs.

According to the latest CBI/PwC Financial Services Survey, profit growth has been driven by a further widening in spreads and an increase in income from fees, commissions and premiums.

In the survey 48% of businesses reported an increase in business volume with only 17% stating a fall.

Moreover, all customer categories of business volume grew, with industrial and commercial showing an increase of 20%, financial institutions growing by 12%, private individuals by 16% and overseas customers by 8%.

Of the 96 firms taking part in the survey, 34% reported a rise in profits with just 15% reporting a dip in numbers.

The figures shown in the survey appear to be positive across the board with income from fees, commission or income rising by 18% and 35% of firms reporting a rise in employment.

Financial Services sector employment is thought to have increased by 2,000 in the three months to March and is expected to increase again next quarter, by 2,000, according to the correlation of the CBI’s survey data with the ONS.

Matthew Fell, CBI Director for Competitive Markets, said:“This has been a strong quarter for the financial services sector, with robust growth in business volumes, an increase in profitability and upbeat investment intentions.

“Concerns over the lack of availability of professional staff have eased since January and overall employment rose unexpectedly this quarter.

“But recent problems in Cyprus risk reigniting concerns about Eurozone stability.

“At the same time, regulation and compliance are still likely to be significant drags on business throughout this year.”

Concerns about the level of demand has dropped as a factor likely to limit the level of business over the year ahead, with just 64% of respondents citing it as a concern compaired with 90% last quarter.

The report suggests that the positive figures represented in this most recent survey are expected to continue to rise.

39% of firms reported that they expect business volumes to increase next quarter while just 12% expect them to fall.

However, regulation and compliance costs are likely to remain a drag on business.

Regulatory compliance is expected to be an increasing burden in the coming year, with 23% of respondents suggesting that it may limit the level of business.

61% of respondents thought they would need to increase their regulatory spend over the coming year.

The firms also stated plans to launch more new products and services in the coming year in order to drive new business growth.

Investment intentions for the next twelve months were particularly strong for IT which increased by 36% and marketing which rose by 25%.

Investment expenditure plans also improved sharply for land & buildings and plant & machinery, with expenditure in both categories now expected to be little changed over the next year.