The 85th CBI/PwC Financial Services Survey shows a picture of continuing recovery in sentiment and volumes of business, even if activity remains below normal levels. Most sub-sectors of the industry report encouraging topline performance, and some are allowing costs to rise. There are mixed views over employment levels and investment is declining, although many firms are spending on regulatory compliance. The medium-term outlook remains tinged with caution.
The survey shows a further improvement in UK financial services sentiment, which has now been moving upwards for 18 months. Aggregate growth in volumes of business remains solid, very much in line with last quarter’s prediction. This suggests that activity is continuing to pick up after a very hesitant early recovery during the latter part of 2009 and the early months of 2010.
The majority of financial services sub-sectors have shared in this increasing activity, and predict further growth early next year. Two important exceptions are the banks and building societies, where weak retail demand is expected to lead to subdued activity. However, in the case of the banks this cautious view is partly offset by the outlook for commercial demand, which is expected to pick up in the coming quarter.
Overall, the slow but steady improvement in the industry’s survey responses is consistent with the improving outlook for the UK economy. Forecasts from independent economists and the Office for Budget Responsibility suggest that 2011 will see an improvement in GDP growth, although consumer spending is still expected to lag behind the wider economy. [Extract from executive summary]
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