Financial services count cost of jobs and profit hit after unprecedented downturn
FINANCIAL services companies suffered their sharpest ever downturn in the second quarter of the year as the coronavirus pandemic piled pressure on jobs and profits.
As many as 62pc of firms were hit by a slowdown, with just 10pc reporting an increase in volumes, according to a survey by accountant PwC and the Confederation of British Industry.
Building societies and general insurers selling products such as car and travel cover were hit by the steepest drop in business volumes, with falls of more than a third in both industries.
The outlook for the next three months is similarly gloomy. Only a fifth of firms say they are more optimistic about the future than they were three months ago, compared with 45pc who say they are less optimistic.
Andrew Kail, head of financial services at PwC, said: “While the financial services sector has been hit less hard than industries such as retail, it is no surprise to see levels of optimism decline. Business volumes and margins have inevitably fallen as customer demand has waned.”
The industry suffered its biggest hit to profits since the financial crisis as a brutal recession sent defaults surging because hard-pressed borrowers struggled to pay their bills.
Employment fell at the fastest rate since 2010 as 38pc of firms cut jobs.
The average business put 8pc of staff on the taxpayer-funded furlough scheme.
More than half of companies suffered a fall in profits, and businesses predicted the next three months could be almost as difficult.
Almost all firms can adapt to social distancing measures – with many allowing staff to continue working from home – but absences due to school closures and transport problems were identified as the biggest operational challenges.
Nearly two thirds of businesses plan to speak to landlords about cutting office space as the property sector braces for a fall in demand now companies have embraced remote working.