UK financial services sector falters - CBI

The UK’s financial services sector contracted for the first time in nearly four years in December, an industry survey showed on Tuesday.

According to the latest CBI Financial Services Survey, business volumes contracted sharply in the three months to December end, with a weighted balance of -23.

It was the first contraction since June 2020, and compares to a balance of 27 in the previous quarter.

Profitability was also subdued across the sector, falling to -3 from September's 13. Optimism was also notably weaker, with volumes forecast to be broadly flat in the first quarter of 2024 and the future profitability balance falling to -19.

However, firms still expected to grow their headcount, albeit at a slower rate, while investment in IT, vehicles, plant and machinery was forecast to grow over the next 12 months.

Louise Hellem, chief economist at the Confederation of British Industry, said: “2023 ended on a flat note for financial services firms.

“However, it is encouraging to see that many business are still looking to grow their workforce and increase investment going forward.

“With the chancellor having answered the call to make full expensing permanent…it is pleasing to see greater confidence among prospective investors in these areas.

"At the spring budget the government should provide an update on the green finance strategy so that the financial services sector can continue to play its part on the road to net zero.”

A total of 124 financial services firms were surveyed between 21 November and 15 December 2023. A balance is the difference between firms stating that output had risen and those answering it had declined.