British financial sector registers fastest growth since 1996

The British financial sector recorded the fastest growth in Q4 of 2014 since 1996, reports CBI.

Overall business volumes in the UK’s financial sector rose at their fastest pace since 1996, according to the Confederation of British Industry (CBI). Firms in the sector also reported strong income growth and falling costs, helping to improve profitability for the second consecutive quarter.

Financial firms optimistic when looking ahead

In the three months to December the majority of UK financial sector firms (57 per cent) were showing healthy growth in both volumes and income, according to the Financial Services Survey from the CBI and PwC. Demand was seen driving the growth, with contributions from both UK households and corporates.

Furthermore, a balance of 37 per cent of those surveyed were optimistic about the overall current business situation when compared with three months ago, while 59 per cent of respondents said they were optimistic about volumes increasing in the next quarter.

“Financial services firms continue to be optimistic, but we will see them investing more to stay ahead of new entrants, deal with technology challenges, meet increasing regulatory and structural reform costs and deliver better results for customers,” said Kevin Burrowes, UK financial services leader at PwC.

“The increased investment in land and buildings is a sign of banks looking at expanding into cities outside London such as Manchester and Edinburgh due to high cost and capacity issues in the capital,” he added.

Employers ramp up training investment

A slight drop in employment was noted, with the banking and general insurance sectors dragging the overall total lower, but the survey did highlight a trend to increased investment in training, which saw a record rise in the three months to December.

Rain Newton-Smith, CBI director of economics, said: “The employment picture was mixed last quarter but firms are boosting their spending on training. It’s encouraging to see the majority of companies planning to increase their investment spend, especially on IT and marketing, to increase efficiency and to reach new customers as competition and technology change the nature of the sector.”