The
financial services sector says that business volumes have fallen at the fastest
pace for nine years, forcing firms to cut costs in a bid to sustain
profitability.
In
a quarterly survey by the CBI and PricewaterhouseCoopers, 42 per cent of
companies said business volumes fell over the past three months while 34 per
cent reported they had risen. The resulting balance of minus 8 per cent is the
worst figure since December 1992.
Firms
expect a modest bounce back over the next three months with a balance of 5 per
cent-plus saying volumes would increase. This has helped stabilise business
confidence, which had fallen at the fastest pace for three years following the
11 September attacks.
But
declining global demand has caused the biggest fall in profitability since
March 1991. As a result, firms are reducing staff numbers and cutting
investment – in particular in marketing and IT.
Marketing
expenditure has now fallen for two consecutive surveys, the first falls since
records began in September 1992. This survey’s findings also show IT
expenditure being cut for the first time since September 1992.
Employment,
which had grown steadily since 1997, fell for the second successive survey with
the sharpest falls among fund managers, banks and securities traders. Companies
expect the pace of job cuts to increase over the next three months.
Firms
said business volumes have been hardest hit for securities traders, fund
managers and life insurers. But general insurers, insurance brokers and
building societies all reported volume growth.
John
Hitchins, financial services partner at PricewaterhouseCoopers, said: "It
is clear from the survey that the industry remains concerned about the impact
of economic slowdown. But confidence has stabilised on the back of declining
fears about the UK sliding into recession.
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"With
a clear focus on cost cutting, the sector looks poised to react according to
how markets settle following the launch of the euro and the steady resumption
of business."
