Confidence amongst City firms highest for a year, says CBI

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The Independent Online

Financial services firms enjoyed their first increase in business volumes for a year last month, according to a survey that will boost hopes that the City of London is finally emerging from recession.

Confidence among the firms, which range from investment banks to insurance brokers, also rose for the first time since last June, the Confederation of British Industry said. However the CBI, the UK's largest employers' organisation, repeated its call for a cut in interest rates this week, saying the climate was still gloomy.

Its quarterly survey showed that 22 per cent more firms reported a rise in business compared with those who suffered a drop. This compared with a balance of minus 12 per cent in March, which was overshadowed by the Iraq war and falling stock markets. This had triggered a slump in confidence to the lowest level since the Russian financial crisis of autumn 1998. Yesterday's survey showed that optimism has rebounded, marking its first increase since June 2002.

Business volumes are expected to go on growing over the next quarter although the overall level is still considered below normal. Ian McCafferty, the CBI's chief economist, said the end of the Iraq war and revival in the stock market has boosted confidence in financial services, but added: "It's too early to celebrate. With business still below normal and companies concerned about the year ahead, an interest rate cut this week would help secure these early indications of recovery."

The CBI and accountants PricewaterhouseCoopers, which was also involved in compiling the survey, said job cutting continued during the past three months in the sector and is expected to continue during the next three months at the same rate.

It was slightly less severe than in the last quarter of the year, but still represents a much more severe consolidation in financial services employment than during 2002, they said.

John Hitchins, PwC's UK banking leader, said: "The continued pressure on jobs and worries about the level of demand indicate that growth in confidence is still fragile."