Steady growth continues in financial services

Business volumes grew for the second consecutive quarter, across all industry sub-sectors except for life insurance. However, growth was not as strong as expected, partly reflecting stable business volumes in the banking sector against expectations of robust growth.

Volumes are expected to rise at a stronger pace next quarter across most areas, though not general insurance or insurance broking. However, this survey was concluded before the Budget so changes to the annuities market on the Life Insurance sector have not been taken into account.

Overall profitability in the financial service sector continued to grow, but at a more moderate pace compared with the previous quarter. Profits are expected to grow at a similar rate over the next three months.

Investment intentions for the next 12 months were positive across all investment categories, with IT predicted to grow most rapidly. Firms indicated that the main drivers of increased capital spending were replacement, capacity expansion and reaching new customers.

Matthew Fell, CBI Director for Competitive Markets, said: “Financial services firms are growing steadily and are optimistic about their business situation. The fact that competition is growing as a potential business constraint highlights intensifying activity in the sector.

“It’s also particularly encouraging to see that investment intentions continue to be positive across the board for the second consecutive quarter, strengthening further in some cases.

“Businesses plan to spend heavily on IT and are scrambling to find new professional staff to meet growth demands.”