According to a new survey from the CBI and PricewaterhouseCoopers LLP, strong financial growth seen during the last two years to September has taken a sharp downturn over the last three months. The Financial Services Survey shows that the decline in business volumes was the most rapid since March 1991.
Chief economic adviser, Ian McCafferty, said: "After two years of strong growth there has been a clear turnaround within the financial services sector. The credit squeeze has delivered a sharp shock to business volumes over the past three months, and it seems that difficulties are likely to persist for some time yet."
The aftermath of the credit crunch has seen income values fall significantly, while sentiment within the business community has soured and costs continue to rise. However, certain sectors, notably IT, have seen growth in profits during the three-month period. As a result, more staff were taken on within these business areas and plans for further investment remain in place.
However, the survey reveals that overall business volumes fell during the three months to early December. While ten per cent of respondents claimed volumes had risen, 44 per cent reported a decline. This works out at -33 per cent on an aggregated basis compared with the anticipated -11 per cent and not far from the -44 per cent registered in March 1991. Further decline is expected in the next three months, albeit at a slower rate.
A record proportion (24 per cent) of financial services companies believe their ability to raise funds will hamper growth over the coming year, particularly for building societies, with 92 per cent believing this will be a problem. "This is, however, a very resilient sector that sees better prospects over the horizon, and it is encouraging that profitability, job creation and investment plans are all still positive," said Mr McCafferty.
sector has also experienced some turbulence. Clare Thompson from PricewaterhouseCoopers LLP said: "The results of this quarter are mixed across general insurance and remain more optimistic than the life insurance sector. There is, however, some divergence in sentiment between personal and commercial insurers, a result of varying business environments, rather than the implications of the credit squeeze."
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