Growth and profits slide in UK financial services - CBI

Profitability across the UK’s financial services sector tumbled in the last quarter, an industry survey showed on Thursday, as growth slowed ahead of this month’s Budget.

According to the latest CBI Financial Services Survey, profitability in the three months to September fell at the fastest rate since March 2009, with the weighted balance tumbling to -49 from -5 in the second quarter.

Volumes growth also slowed notably, with the balance falling to 6 from 22.

In addition, headcounts declined after five consecutive quarters of growth while optimism slumped to -13 from 17.

Louise Hellem, chief economist at the Confederation of British Industry, said: "After two strong quarters of activity this year, financial services firms are now reporting slowing business volumes growth and falling optimism.

"A record-fast fall in spreads and moderate rise in non-performing loans have contributed to profits falling at their quickest rate since 2009."

The survey of 141 firms also showed investment intentions had deteriorated further during the quarter. Respondents expect to cut investment in land and buildings in the next year at the greatest extent in the survey’s history. Capital expenditure on vehicles, plant and machinery was also expected to decrease.

Respondents cited inadequate net returns and concerns about the potential tax implications of the upcoming Budget.

Hellem added: "The government must provide firms with the clarity and confidence they need to invest in the UK."

The survey was carried out between 29 August and 16 September.

A weighted balance is the difference in percentage points between the number of firms stating output rose against those stating that it was down.