The City is having a good time as some of the worst risks over the euro area ease


LONDON | The volume of business in the financial services sector grew for the eighth quarter running and at well above the average pace in the three months to March. A CBI/PwC Financial Services Survey reported this week green shoots in the City, with the first rise in optimism among financial services firms (+32%) in a year and an unexpected increase in employment in the sector (a balance of +19%).


Ian McCafferty, CBI Chief Economic Adviser, said:

“Optimism levels and business investment intentions have also improved, in contrast to last quarter as some of the worst risks around the euro area crisis have eased.

“The unexpected rise in employment is a further encouraging sign for the sector. But with the current level of business regarded as below normal, conditions still remain challenging.”

Of the 95 financial firms that responded, 44% saw volumes rise in the quarter to March, and 21% reported a fall. The resulting balance of +23% was well above the long-run average (+12%) and driven primarily by business with private individuals. In the coming quarter, companies expect growth to accelerate somewhat (+34%), again mostly coming from business with individuals.

The rise in incomes was driven by fee, commission, or premiums (+13%), with the value of net interest, investment or trading remaining flat (+3). Meanwhile, average spreads widened further this quarter (+11%), building on already solid growth in the previous quarter (+43%). The growth in income more than offset the impact of the sharp increase in total costs, allowing profitability to rise more rapidly than in the previous three quarters (+21%).

Numbers employed in the financial services sector rose unexpectedly (a balance of +19% compared with an expectation of -18%). A similar increase is expected in the next quarter (+20%).

Financial services firms resumed investment in both marketing (+16%) and information technology (+47%) in the three months to March, after a slack period last quarter. Spending intentions for IT were the strongest in a year, as financial services companies looked to increase efficiency.

As has been the case over the last year, a majority of companies continue to cite uncertainty about demand (+55%) and inadequate net return (+46%) as the factors most likely to limit capital expenditure over the next twelve months.

Kevin Burrowes, UK Financial Services Leader at PwC said:

“More positive economic data and a slightly more stable environment in the euro zone mean that banks are much more confident about their sector. This confidence is translating into recruitment with many banks reporting that they plan to increase headcount over the coming months. Banks are also planning to invest in their businesses, particularly in their digital offerings, and customers should reap the rewards of this.

About the Author

Victor Jimenez
London contributor at, reporting about the City and the Eurozone economies. He regularly writes for Spanish newspaper group Prensa Ibérica--some of his features include shared work with journalists of The Daily Telegraph and the BBC.

Be the first to comment on "The City is having a good time as some of the worst risks over the euro area ease"

Leave a comment