Financial sector 'sees improvement'
The first rise in business volumes since the onset of the credit crunch fuelled hopes of a recovery in the financial services sector.
The CBI found that 32% of financial firms said volumes improved in the three months to early September, outstripping the percentage reporting a fall for the first time since 2007.
Respondents also reported being more optimistic about the overall business outlook than three months ago, but added they remained worried that a lack of demand could hamper business expansion over the coming year.
Ian McCafferty, the CBI's chief economic adviser, said signs of a brighter outlook were appearing in the sector, after two years of exceptionally tough operating conditions triggered by frozen credit markets.
He said: "Future demand is still a major concern for financial services firms, however, and further pain will continue to be felt in job losses and lower investment."
The CBI study found differences between individual industry sectors, with life insurers and insurance brokers anticipating further, albeit slower, falls in business volumes. They have continued to see subdued demand for core products, while profitability also remains in decline.
In contrast, securities and investment managers saw strong volumes growth over the quarter, while banks and building societies expect that growth will resume over the next three months, led by business with individuals.
This is in line with a recent credit conditions report by the Bank of England, which said lenders expected mortgage availability to improve in the final part of the year due to a stronger housing market and wider economy.
The part-nationalised banks are under pressure to increase lending in return for their taxpayer support. Royal Bank of Scotland has agreed to lend £25 billion to homeowners and business this year, while Lloyds Banking Group is making £28 billion available in the next two years.
Andrew Gray, a UK banking adviser for PwC, which helped produce the report, said business levels in the banking sector were likely to remain subdued despite the recent signs of recovery.
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