Unsurprisingly the quarterly survey of 103 firms, which was conducted between 2-26 March, found that business volumes, profitability, and employment are all tipped to fall over the next quarter.
Despite mixed market conditions across financial services mortgages, life insurance, general insurance, and insurance broking all saw increased profitability in the three months to March 2020, according to the latest CBI/PwC Financial Services Survey.
However, the quarterly survey of 103 firms, which was conducted between 2-26 March, found that business volumes, profitability, and employment are all tipped to fall over the next quarter.
Investment plans for the year ahead have also deteriorated. Optimism about the overall business situation in financial services fell sharply in the three months to March, albeit at a slower pace than some of the drops seen over 2019. Furthermore, the value of non-performing loans also ticked up sharply in the past quarter.
Meanwhile profitability fell slightly in the three months to March (-4%), but the picture was once again mixed by sub-sector: profits fell in banking and life insurance, but grew in finance houses, insurance broking, general insurance and investment management. Next quarter, profitability is expected to fall overall (-15%).
Rain Newton-Smith, CBI chief economist, said: “The bulk of the survey took place before social distancing measures were ramped up, but there were already signs of the COVID-19 pandemic leaving its mark.
"Expectations for business volumes and headcount weakened, non-performing loans rose sharply and financial firms are planning heavy cuts to investment in the year ahead.
“Financial services are already playing an essential role in helping companies with their cashflow, through channelling funds from the government’s support schemes. But like other businesses, they’ve also been struck by staff shortages and changes to how they operate.”
While about 30% of financial services firms said they had hired more staff, 39% reported a drop in headcount, resulting in a score of -9%, which was the fastest decline in employment in a year.
