Finance firms grow business after two year slump

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Financial services companies grew business for the first time in two years over the summer, a new industry survey will show today.

The survey carried out by the CBI, the business lobby, and accountancy PricewaterhouseCoopers found that the overall volumes of business had grown for the first time in two years, but cautioned the levels were still "well below normal". It also found that sector optimism in the third quarter was the highest since 2004. The index, which the companies compile every quarter, hit 40 per cent in the three months to September, a year after the index hit a negative reading of 60 per cent.

"Some institutions may still face a threat to profitability," the report said, "but they are at least able to quantify the potential impact with a greater degree of certainty than before."

Respondents said the financial crisis was "unlikely to worsen ... Furthermore, there is an increasing consensus that the UK economy will grow in 2010, albeit slowly".

Securities traders and investment managers were the most optimistic. The CBI said: "Securities traders are enjoying life again, thanks to the strong rebound in equity markets. Forecasts for revenue are more bullish than at any point since the beginning of the crisis." The equity markets also helped the mood of fund managers. Bankers had moved from negative confidence in June to 20 per cent feeling more optimistic in September. "A modest balance of respondents feel business will recover during the autumn," the survey said.

Building societies remain the only negative, where funding difficulties put pressure on sector profitability. "Forecasts for growth are firmly on the pessimistic side," the report found. "Things may be looking up but that does not mean autumn will be a happy period in every quarter of the industry," the CBI warned.