Most financial services firms logged rising business volumes in the final three months of last year and firms expect similar improvements in the first quarter of 2015, according to a survey by the Confederation of British Industry and PricewaterhouseCoopers.

Most financial services firms logged rising business volumes in the final three months of last year and firms expect similar improvements in the first quarter of 2015, according to a survey by the Confederation of British Industry and PricewaterhouseCoopers.

Some 64 per cent of financial services firms said that business volumes were up, while 7 per cent said they were down, giving a balance of +57 per cent. This is the strongest growth since December 1996, when it was +79 per cent. Looking ahead, 65 per cent of firms expect business volumes to increase, while 6 per cent said they will fall, giving a balance of +59 per cent.
 
The survey found that 49 per cent of financial services firms said they felt more optimistic about the overall business situation compared with three months ago, while 12 per cent said they felt less optimistic, giving a balance of +37 per cent.

Overall business volumes rose at the fastest pace since the mid-1990s, with demand from both UK households and corporates underpinning solid growth across most industry sectors. Building societies were the exception, with business volumes falling unexpectedly, the survey’s authors said today.

Financial services firms reported strong income growth, particularly from fees, commissions and premiums, but also a decent performance from net interest, investment and trading income. Alongside falling costs, that meant profitability improved at a lively pace for the second successive quarter. Profit growth was seen across all sectors, with the exception of life insurance, it said.

“Financial services firms continue to be optimistic, but we will see them investing more to stay ahead of new entrants, deal with technology challenges, meet increasing regulatory and structural reform costs and deliver better results for customers,” Kevin Burrowes, UK financial services leader at PwC, said.

“The increased investment in land and buildings is a sign of banks looking at expanding into cities outside London such as Manchester and Edinburgh due to high cost and capacity issues in the capital. Employment has fallen, but training expenditure has increased as banks face desired-skill shortages such as compliance experts and we expect this trend to continue,” Burrowes said.

Employment fell in banking and general insurance, dragging down overall employment. A somewhat faster decline is expected next quarter, with only four out of the eight sectors expecting to raise their headcounts. But firms are spending more on training, which rose at the fastest pace on record in the three months to December.