Healthy growth for financial services sector
After a year of gloom, the mood of the UK's financial sector appears to have been buoyed in recent months by the broadly resilient economy, says a new survey.
Sentiment in the financial services sector deteriorated throughout 2016, but the most recent findings show it has finally stabilised in the first quarter of this year, according to research from the CBI and accountants PwC/
But optimism about the overall business situation continued to vary across sectors. Sentiment was unchanged in the banking sector, but this followed four consecutive quarters of decline.
Building societies, life insurers, insurance brokers and investment managers all felt more optimistic than in the previous quarter, while finance houses and general insurers felt less optimistic.
Business volumes saw healthy growth in the first quarter of 2017, expanding at a faster pace than expected in the previous survey. Building societies and investment managers in particular reported a solid expansion of activity. However, growth in overall business volumes is expected to slow over the coming three months, suggesting firms remain cautious over the outlook.
The rise in business volumes drove robust growth in profits, in line with expectations, although profitability is expected to improve more moderately in the quarter ahead.
CBI chief economist Rain Newton-Smith said: “It’s great that financial services firms have begun the year with a spring in their step – notwithstanding Brexit uncertainty – with volumes expanding at a robust pace, profitability improving and hiring on the up.
“Underlying business in the sector is holding up well, and optimism about global markets, along with stronger global growth, is having a positive knock-on effect. However, whilst demand in the wider UK economy has proven resilient, growth is likely to slow as the year goes on, amid broader uncertainty and higher inflation."
