Confidence among financial companies at two-year low

Financial services companies are more pessimistic about prospects for their business than at any time in more than two years, according to a survey by the Confederation of British Industry.

The survey, conducted by Coopers & Lybrand, showed optimism about business prospects was at its lowest level since September 1995 - despite a year of booming sales. Of 230 companies surveyed, a quarter had lost confidence.

David Sayer, partner at Coopers & Lybrand, said: "The most striking feature is that overall profitability rose strongly, yet there's been a negative effect on confidence."

He said banks were worried about rising interest rates, the impact of the Asian financial crisis, and competitive pressure from the newly converted building societies. The report said they were concerned the worries could become self-fulfilling, despite a lack of hard evidence.

Life insurers were increasingly afraid that the new regulatory regime, under the Financial Services Authority, would hit profits and subject them to much tougher control.

As if to confirm this, the Personal Investment Authority yesterday gave itself the power to ban directors from working in the industry as from 18 May.

- Andrew Verity