Fall in business volumes and employment for financial services

Business volumes and employment in the financial services industry fell over the past three months, ending a year of mixed fortunes, according to the latest quarterly survey by the CBI and PricewaterhouseCoopers.

21% of respondents said volume of business was up over the last three months but 31% said it was down. The balance of -10 for the final quarter of 2002 compares with zero in the first and third quarters and +43 in the second quarter. They are less negative about the next three months but still expect business volumes to fall.

The decline in the volume of business is not large but for the industry as a whole it is the steepest since December 1992. However, the overall decline masks stark differences between individual sectors within the financial services with general insurers and finance houses reporting the biggest growth in business volumes. By contrast, substantial declines were experienced by fund managers, life insurers, insurance brokers and stock brokers.

Employment in financial services fell for the first time since the March survey but by less than had been expected. Employment is expected to decline more severely over the next three months, though the recent pattern has been for employment to hold up better than anticipated.

John Hitchins, UK banking leader at PricewaterhouseCoopers, says: “The industry ended 2002 in a worried frame of mind, reflecting growing concerns about a slowdown in personal sector business and specific fears on the state of the housing market. More jobs are likely to be lost in 2003 as firms grapple with their cost bases in the face of uncertain income prospects.”

Ian McCafferty, CBI chief economist, says: “2002 was a difficult year for many parts of the financial services industry especially those affected by the performance of the stock market. Across the sector as a whole, the sharp rebound reported in the April to June quarter prompted hopes that the industry would return to its more normal pattern of continuous expansion. But subsequent surveys, including this latest snapshot, show that difficult conditions remain.”