The pace of job cuts in the financial services sector is expected to accelerate following its sharpest fall for two years in the final quarter of 1995, according to the latest trends survey. Worst-hit by the cuts continue to be the high street banks and insurance companies, as they drive for efficiency gains in an increasingly competitive environment, said the CBI/ Coopers & Lybrand Financial Services Survey.
"Companies have responded positively to the strong pressure on their margins, by cutting operating costs through employment reductions. These trends are set to continue, suggesting further scope for efficiency gains over the months ahead," said Sudhir Junankar, the CBI's associate director of economic analysis.
Across the board, business confidence showed a slight improvement since the previous survey in September 1995. But there were sharp differences in mood between sectors.
Investment banks were extremely buoyant thanks to the takeover and stock market booms, and fund management is enjoying a good run, while banks and insurers continue to suffer from falling confidence.
Improved business volumes and the downward trend in costs helped overall profitability to recover. Securities houses expect this to continue, and banks are looking forward to the largest increase, while general insurers are bracing themselves for a further sharp decline. Although the survey showed a rise in business volumes in the last quarter of 1995, the level of business continued to be regarded as well below normal.
"Domestic competition is now the most likely constraint on business prospects over the coming year, followed by the level of demand," the survey reported.
Average spreads narrowed at the sharpest rate yet recorded in the survey, indicating the competitive pressures. This trend is expected to continue.
While investment banking reports an increase in employment, the general trend remains one of investing in technology while reducing staff numbers. "Fierce competition is not going to disappear," said John Hayes, a senior member of Coopers & Lybrand's financial services consultancy practice. "There is a clear shift towards more technology in providing products and services. Investment in IT is expected to increase markedly over the coming year."Reuse content