Boost for financial firms as sales rise
Despite the controversy over bonus payments, Britain's financial services sector continued to recover during the final quarter of 2010, a report from the CBI reveals today, with businesses such as banking, insurance and investment reporting strong growth in activity.
The employers' group's data is a welcome boost following a string of reports in the past week that the economy had begun to falter, particularly in December when the cold weather wreaked havoc for many firms, especially in the service sector of the economy.
The CBI said that 50% of financial services businesses had reported a growth in sales volumes during the three months to the end of December, while 23% reported a fall. The positive balance, of 27%, was almost identical to the corresponding figure of 28% for the third quarter of 2010.
With financial services not affected by the weather, volumes improved in every part of the services sector in the final quarter. However, the growth was not matched by an increase in profitability, with profits growing at their slowest pace for 18 months, according to the CBI's survey.
Many firms also gave warning that they expected to see the pace at which volumes are growing to slow during the first three months of this year.
John Cridland, the CBI's director general designate, said that the mixed picture and the cautious outlook was a reminder that the economic recovery would continue to be lumpy.
"Activity in the financial services sector grew strongly over the second half of 2010, but firms see growth slowing over the coming three months, and expect another fairly moderate increase in profitability," he said.
"Numbers employed have fallen significantly and investment plans have weakened since September - this probably reflects renewed cost control given little growth in incomes and slower growth in profitability."
One particular worry is that the recovery in the financial services sector, as in other parts of the economy, does not seem to be producing any significant boost for the jobs market.
Instead companies are focusing on keeping their costs as low as possible.
In fact, the CBI said that numbers employed in finance fell at the fastest rate since March 1993 during the fourth quarter.
The resulting negative balance of 48% of employers shedding jobs as opposed to taking them on reflects that trend.