Financial services sector reports slide in business volumes - survey

Business volumes across the financial services sector have tumbled at the fastest rate on record, research published on Tuesday showed.

According to the latest quarterly CBI PwC Financial Services Survey, just 10% of respondents saw business volumes increase in the three months to June, while 62% reported a fall, giving a balance of -52%.

Optimism was also hit hard, with a net balance of -25%, while overall profitability declined; of those surveyed, 13% reported an increase in profits and 53% reported a fall, giving a balance of -40%.

Looking ahead, profits are expected to fall at a similar pace in the next quarter - with balance of -37% - but business volumes are forecast to stabilise, with a balance of -3%.

When it came to employment, only 1% of financial services firms increased headcount in the last quarter, and 38% reduced it, giving a balance of -37%. That is set to worsen in the coming months, however, with an employment expectations net balance of -41% - the weakest since September 2008.

Rain Newton-Smith, chief economist at the Confederation of British Industry, said: "Financial services have not escaped the fallout of the coronavirus pandemic. Employment, profitability and volumes all fell sharply, with the outlook similarly bleak for the quarter ahead.

"Government intervention so far has saved countless jobs, yet anxious months for many still lie ahead.

"Ultimately, preserving and creating jobs should form the centrepiece of the chancellor’s update."

Chancellor Rishi Sunak is due to deliver his first official fiscal statement since the March budget on Wednesday and it is expected to focus on boosting the UK economy as it emerges from lockdown. Sunak has called it a fiscal plan, however, rather than an emergency budget.

Andrew Kail, head of financial services at PwC, said: "While the financial services sector has been hit less hard than industries such as retail it is not surprise to see levels of optimism decline.

"Financial services firms have the weighty responsibility of continuing to serve the needs of key stakeholders, including customers, employees and shareholders, while working closely with the government to drive the economy."

The 111 firms who took part in the survey, which was carried out between 1 and 18 June, were also asked Covid-19 specific questions. The average proportion of staff that had been furloughed was 8% and a majority - 53% - did not feel that any further measures were needed to address funding challenges in their business.

The key operational challenges for firms as lockdown eased were identified as workforce absences due to school closures (42%) and transport difficulties (37%), rather than social distancing.