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Financial services less optimistic despite growth


Firms have cuts jobs and put investment on hold

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Optimism among financial services fell in the three months to June, despite a rise in volumes and income thanks to overseas and private customers, new research showed on Friday.

The uncomfortable revelation on Wednesday that US and UK regulators have hit Barclays with a £290 million fine for manipulating key interest rates will further damage public trust in banks, adding to the difficulties in the financial services sector.

Management at financial services firms said they planned to cut jobs and curb investment, according to the latest the CBI/PwC quarterly survey on the sector. Compared to the previous quarter, firms plan to invest less because of the uncertainty about demand and prospects, the survey said.

However firms said business levels were “above normal” for the first time since the financial crash in 2007, with 59 percent of the 108 firms in the study seeing a rise in business volumes in the quarter to June. The resulting balance rose to 39 percent, marking the ninth consecutive quarter of growth.

Banks saw a strong rise in volumes and income while total costs remained unchanged, leading to a sharp rise in profitability.

“The banks continue to be more confident in their own performance than their operating environment. Revenue, spreads and profitability are all increasing, but there is tangible concern about the impact of regulation,” Julian Wakeham, PwC partner, investment banking, said.

Overseas customers and private individuals helped boost volumes, while industrial and commercial companies dragged down overall growth in the sector.

Recruitment fell, against expectations of a rise but firms said they expected to resume hiring over the next three months.

Ian McCafferty, CBI chief economic adviser, said: “ … businesses are less optimistic than in the previous survey, have reduced headcount and are reappraising investment plans.”

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