Financial services sentiment drops in second quarter as volumes sink

(Sharecast News) - Business activity and confidence levels across the UK financial services sector slumped in the second quarter, according to a survey out on Monday from the Confederation of British Industry. After a temporary recovery over the first three months of the year, business volumes registered a significant reversal, with the number of firms seeing a decline in activity outweighing those reporting no change or an increase by a wide margin as the weighted balance shifted to -58% from +65% previously.

Over the coming quarter, volumes are expected to decline, albeit at a relatively slower pace (-32%).

At the same time, profitability levels fell at a steep rate (-65% from +38% previously), with more declines expected over the next three months (-55%).

As a result, sentiment among financial services firms weakened during the period, with the weighted balance falling to -34% from +31%.

One bright spark was that headcounts rose across the sector (+14% from +3% previously), following seven consecutive quarters of flat/falling employment, with more increases predicted over the coming quarter (+12%).

Louise Hellem, the CBI's chief economist, said the survey results reflected a "sharp deterioration in business conditions" in the second quarter.

"The political transition underway must not slow delivery of the government's Financial Services Growth and Competitiveness Strategy at a time when activity has deteriorated and firms are facing a more uncertain outlook. Maintaining momentum on reforms - including continuing work with the FCA and PRA to deliver a more growth-focused regulatory framework - will be essential to strengthening the UK's competitiveness and supporting investment," Hellem said.