Demand for financial services set to strengthen

A WEAKER housing market is slowing the growth of building societies.

While sentiment continued to deteriorate across the financial services sector as a whole in the three months to September, despite a broad-based expansion of business volumes and expectations of a stronger quarter ahead, according to the latest CBI/ PwC Financial Services Survey.

The quarterly survey of 94 firms found that overall optimism about the business situation fell slightly, having deteriorated fairly steadily since the beginning of 2016.

Rain Newton-Smith, CBI Chief Economist, said: “It’s encouraging to see volumes and profitability continuing to expand for most financial services firms, with hiring expected to pick up and investment intentions improving.

“While demand in the sector is expected to hold up in the near-term, we can’t ignore the fact that optimism has dropped in almost every quarter for the past two years.

“With Brexit uncertainty affecting the wider economy, it’s vital that substantive progress is made during the next round of Brexit negotiations, so that transitional arrangements can be agreed and businesses can make decisions now about investment and employment that will affect economic growth and jobs far into the future.”

But while banks and building societies were markedly less optimistic, finance houses, life insurers and investment managers were more optimistic than they had been in the previous three months.

Growth in overall business volumes slowed in comparison with the first half of 2017, but the overall level of business was deemed to be normal. Volumes expanded in all but one subsector – building societies – where volumes contracted at the fastest pace since 2011.

Looking ahead, demand in the financial services sector as a whole is expected to strengthen next quarter, although building societies expect little respite, with a further fall in volumes expected.