Business volumes in the UK's financial services grew at their fastest pace for four years in the second quarter of this year, according to the sector's latest survey.
The 'Financial Services Survey', compiled by the
Confederation of British Industry (CBI) and
PwC, concluded that volumes appeared poised to grow at a similarly fast pace over the coming three months.Based on responses from 118 companies last month, the survey also found that profitability grew at the fastest rate since December 2015 and looked set to expand at only a slightly slower rate over the next three months.
The survey was published in the week that the latest
IHS Markit/CIPS Purchasing Managers' Index (PMI) for the sector in May stood at a higher-than-expected 62.4 in an index where a reading above 50 indicates growth.
Job creation was the strongest for seven years but even so the PMI found that staff shortages had contributed to the highest level of work backlogs since the survey began in 1996, pushing up prices in the process.
The CBI/PwC survey also reflected a growth in employment in Q2 after previously falling for five consecutive quarters. "All sub-sectors saw unchanged or rising headcount, except for banking where employment declined. Overall, numbers employed are expected to grow at a faster pace in the quarter to September," reported the
CBI.
According to the report, the sector's investment in land, buildings, vehicles, plant and machinery will fall in the year ahead, while the expectations of an increase in IT spending was at its highest in almost two years.
Rain Newton-Smith, CBI chief economist, said the survey showed a positive outlook for the sector in the current quarter, amid rising profitability and employment.
“Meanwhile, regulation remains the main driver of disruption. This is sparking positive shifts in operating models – notably through greater tech adoption," she added.
"However, firms are continuing to adapt to the absence of an equivalence agreement between the UK and EU.
“Drilling down into continually strong IT investment plans, it’s clear more and more firms are making the most of new technologies to better understand their customers and drive their business strategies.
“There’s growing demand for digital skills, which should feature strongly in the government’s future plans for retraining and reskilling workers who’ve been affected most by Covid-19.”
Isabelle Jenkins, head of financial services at
PwC UK, said that, with employment across much of the sector on the rise and with business volumes at their highest since the summer of of 2017, the "mood music is positive".
But she said the emphasis in financial services must be on upskilling and investment in tech.
“However," she added, "if transformation is going to be fully embedded, it's critical that businesses act now to truly respond to the shifts in customer demand while continuing to find ways to keep new products coming and more effective ways to engage.”
The survey also found further evidence that the pandemic had created a shift towards remote working, with more than eight in ten finance firms planning to implement more hybrid ways of working.
"Firms expect changes to future ways of working to have a broadly positive impact on productivity, investment in collaboration technology, employee wellbeing, diversity and inclusion and social mobility," said the CBI.
Read more news and views from David Sapsted.
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