Sunday, July 21, 2024

Growth momentum continues in financial services

Financial services business volumes grew solidly in the second quarter, building on a strong rebound in Q1, according to the latest CBI Financial Services Survey. Firms expect volumes to increase at an even faster rate over the next three months.

The quarterly survey, conducted between 30 May and 17 June, also showed that optimism increased and headcounts grew for the fifth consecutive quarter. However, profitability fell slightly, and the value of non-performing loans increased for the second consecutive quarter.

Key findings:   

  • Business volumes grew solidly in the quarter to June (weighted balance of +22%) for the second consecutive quarter (+36% in March). Firms expect volumes to increase at an even quicker rate in the next three months (+53%).
  • Optimism increased in the quarter to June, compared with three months ago (+17% from +29% in March).
  • Average spreads declined in the quarter to June (-16% from -19% in March) but are expected to increase next quarter (+11%).
  • The value of non-performing loans increased again in the quarter to June (+11, unchanged from March), seeing the joint-fastest rise since early 2021. However, they are expected to be unchanged over the next quarter (+1%).
  • Profitability fell slightly in the quarter to June (-5% from +37% in March). The decline is set to be short-lived, with FS firms expecting profitability to increase strongly next quarter (+46%).
  • Headcount grew in the quarter to June (+18% from +40% in March), but this marked the slowest rise in the five-quarter run of growth seen so far. Firms expect headcount to grow at the same pace next quarter (+18%).
  • Firms expect to increase investment in IT in the next 12 months (compared to the last 12). However, capital expenditure on land & buildings and vehicles, plant & machinery is expected to fall considerably.
    • The cost of finance was the most commonly cited factor likely to limit investment over the next 12 months, rising to its second-highest share on record (36% from 11% in March).
    • The share of firms citing inadequate net returns as a concern fell noticeably from March (22% from 46%), while the proportion citing demand uncertainty also fell sharply (to 16% from 53%).

Louise Hellem, CBI Chief Economist, said: “Financial services firms have seen a second strong quarter in a row this year, with optimism and business volumes continuing to rise. Positive business conditions have supported a further increase in headcount in the sector. However, investment plans remain mixed as concerns around the cost of finance were at their most widespread in nearly a decade.

“Businesses will be looking at the General Election, and the clear mandate given to the incoming government, as a reset moment for the economy. That means looking to the new government to hit the ground running and staying laser-focused on delivering growth. It’s those tough decisions, taken early, that will help us to attract investment, seize growth opportunities and revitalise our pitch to global investors.”

A message from the Editor:

Thank you for reading this story on our news site - please take a moment to read this important message:

As you know, our aim is to bring you, the reader, an editorially led news site and magazine but journalism costs money and we rely on advertising, print and digital revenues to help to support them.

With the Covid-19 pandemic having a major impact on our industry as a whole, the advertising revenues we normally receive, which helps us cover the cost of our journalists and this website, have been drastically affected.

As such we need your help. If you can support our news sites/magazines with either a small donation of even £1, or a subscription to our magazine, which costs just £33.60 per year, (inc p&P and mailed direct to your door) your generosity will help us weather the storm and continue in our quest to deliver quality journalism.

As a subscriber, you will have unlimited access to our web site and magazine. You'll also be offered VIP invitations to our events, preferential rates to all our awards and get access to exclusive newsletters and content.

Just click here to subscribe and in the meantime may I wish you the very best.

Latest news

Related news

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.