Optimistic outlook for financial services sector

The
financial services sector is showing the signs of recovery, according to the
latest quarterly survey of the sector by the CBI and PricewaterhouseCoopers.

Business
optimism is growing faster than at any time for two years, though the recovery
so far has been slower than hoped for.

The
research finds that business volumes are no longer declining and, over the next
three months, more financial services firms are expecting them to increase more
significantly than at any time since December 2000. However, levels of business
are still well below what firms consider to be normal.                                              

After
falling sharply in the September survey, business optimism stabilised in
December and has now begun to improve. Seventeen per cent of firms are less
optimistic about their prospects and 35 per cent are more optimistic.

In
December, the sector was neither optimistic nor gloomy, while in September the
majority of firms were negative about future prospects. This survey suggests
that the worst fears of financial services firms about the aftermath of 11
September were not fulfilled.

Finance
houses and building societies have reported the sharpest  increases in confidence. Banks and  general insurers recorded more modest
increases by comparison, but have still shown positive increases in the last
two surveys.

The
CBI’s chief economic adviser, Ian McCafferty, said: "The decline in
business in financial services has bottomed out but we have yet to see a
resumption of the relatively strong rate of expansion that would be regarded as
normal in this sector. Profitability has been hit, but firms appear confident
their efforts to get a grip on costs, and especially staff costs, will turn
profits round."      

By Ben Willmott

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