FINANCIAL services optimism fell in the three months to March, and firms expect a sharp decline in business ahead, a new study is warning.
The bulk of the data-gathering for the latest quarterly CBI/PwC financial services survey was conducted before social distancing measures were ramped up.
But there were already signs of the Covid-19 pandemic leaving its mark, and business volumes, profitability, and employment are all tipped to fall over the next quarter, while investment plans for the year ahead have also deteriorated.
Business volumes were broadly unchanged in the three months to March. Conditions were mixed by sub-sector; volumes fell in banking but remained unchanged in building societies and investment management.
Meanwhile, volumes rose in finance houses, life insurance, general insurance and insurance broking, but expectations for the next quarter are for a marked decline in volumes (minus 30 per cent), the weakest predictions in a year.
CBI chief economist Rain Newton-Smith said: “Expectations for business volumes and headcount weakened, non-performing loans rose sharply, and financial firms are planning heavy cuts to investment in the year ahead.
“Financial services are already playing an essential role in helping companies with their cash flow, through channelling funds from the government’s support schemes.
“But like other businesses, they’ve also been struck by staff shortages and changes to how they operate. As a result, alleviating capacity pressures and streamlining how firms access government support through our financial institutions is vital. With the peak of the economic impact to come, equipping the sector to deliver for business is crucial in supporting the growth recovery beyond the pandemic.”
Andrew Kail, head of financial services at PwC, added: “This pandemic is one of the most significant tests of operational resilience the sector has seen, and the need to move to full workforce remote working, on a global scale for many, has significantly tested business continuity plans.
“The response by the industry has largely been a success. The need to maintain vital customer services in a technically and regulatory compliant manner has seen organisations act at their most agile and responsive.
“The financial services sector must continue to work with customers, the government and the regulators to help the economy recover in the best possible shape. Services it provides across banking, insurance and asset management are central to the sustainability of the corporate sector and millions of people.”
