According to a quarterly snapshot of the industry conducted by the CBI with PricewaterhouseCoopers, the sector has not returned to the performance heights seen earlier in 2004, and banks, insurance companies and fund managers are still feeling the pinch.
The survey found that the return to growth was achieved through tough cost control, and companies are insisting that they still have to go further. As a result, over the next three months they expect to shed jobs at the fastest rate for two years.
Life insurers and banks expect to make the most cuts, but finance houses and building societies mercifully hope to create jobs.
John Hitchins, UK banking leader at PricewaterhouseCoopers, said: ‘The strong performance experienced by financial services firms in the first half of 2004 is unlikely to be repeated at the beginning of 2005 as only modest volume growth is predicted to continue. Sectors with significant personal lending businesses had the most pessimistic outlook.
‘The recent reduction in headcount is expected to intensify in the banking, fund management and insurance sectors and all sectors expressed concerns about the level of demand affecting growth this year.’
And Ian McCafferty, CBI chief economic adviser, said: ‘Like other sectors of the economy, financial services picked-up after a poor August and September. With oil prices having slipped back from their peak and interest rates likely to be stable for the time being, some of the headwinds from the wider economy earlier in the year have diminished.
‘This in turn is helping financial services, though only to a limited extent. The sector had a very strong run up to the middle of last year. That isn’t coming back in the immediate future.’
The study found that the sectors most closely linked to the resurgent stock market tended to do best, and that IT was the only area in which companies were expecting to spend more than last year.
Just one half of UK practices have implemented a pricing structure around auto enrolment implementation and advice - with many suffering increased costs
Deloitte's north-west Europe foray; BDO, Smith & Williamson investment paths; Shelley Stock Hutter; and Wilkins Kennedy discussed by editor Kevin Reed on our Friday Afternoon Live broadcast
Accountants should alter their perspective on auto-enrolment to maximise business opportunities, according to Eric Clapton.
Kevin Reed discusses whether new accountancy group Cogital can rival the Big Four...and its likely direction of travel