PracticeConsultingDoubts grow in financial services sector

Doubts grow in financial services sector

Doubts over the UK's ability to stave off a recession led to the biggest fall in business confidence among financial services firms for more than two years.

According to a survey by the Confederation of British Industry and PricewaterhouseCoopers, 35% of respondents said they were less optimistic than three months ago. Thirteen per cent were more optimistic.

The resulting balance of ?22% compares with a figure of +2% in December 2000.

Sectors closest to the equity markets such as securities traders and fund managers showed the most marked decline in optimism, said Ian Dilks, a partner at PricewaterhouseCoopers Financial Services.

‘Those closest to the “real economy”, including general insurers, remain positive overall and expect future growth in profitability,’ said Dilks.

Douglas Godden, CBI head of economic policy, said: ‘The global slowdown seems to have affected sentiment in the financial services sector, despite continued growth in volumes. Competitive pressures mean that cost-cutting is not feeding through to the bottom line. It is therefore not surprising to see that employment prospects are weakening.’

But the much maligned new economy provided some of the better news with companies indicating that internet business is developing across the sector. Forty two per cent of firms said the total value of their internet business had increased over the past three months, compared with 27% three months ago.

The survey also showed an increasing number of firms are launching online brands, despite misgivings over operating successfully online and the dotcom crash.

But companies complained that e-business development is being hindered by a lack of understanding by customers and suppliers. And there are lingering doubts over security and speed, with 33% of respondents citing it as an issue of concern.

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