According to the latest Confederation of British Industry/PricewaterhouseCoopers survey of the financial services sector, the number of non-performing bank loans has risen by the highest rate since 1993.
To compound problems for the sector, securities traders, fund managers and banks reported significant drops in business volumes.
Sudhir Junankar, CBI associate director of economic analysis, said financial services companies seem less confident about longer term business prospects, with concerns about likely demand conditions at their highest levels for almost three years.
And John Hitching, financial services partner at PwC, said ‘control of costs’ was a problem across almost the whole sector, adding that it pointed towards a slowdown in ‘investment intentions, particularly in IT’.
But profitability slowdown is not confined to the financial services market.
Latest government statistics show while the price of manufactured goods has risen by just 0.8% on the year, the cost of raw materials had climbed more than three times faster at 2.6%.
Manufacturers have been unable to pass on these added costs to the consumer, and as a result profitability levels of companies within this sector have fallen to a nine-year low.
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