Financial services to cut jobs at fastest rate for two years

Britain's financial services industry revived over the last three months after a poor summer, but growth remains modest and firms expect to cut jobs at the fastest rate for two years.

Britain's financial services industry revived over the last three months after a poor summer, but growth remains modest and firms expect to cut jobs at the fastest rate for two years.

A quarterly survey by the CBI and Pricewaterhouse-Coopers showed that optimism in financial services rose as business volumes returned to growth, but remained well below the rates of expansion seen last spring.

The number of people employed in financial services fell for the second successive quarter and the rate of decline is expected to intensify. A balance of 26 per cent of firms anticipate job cuts over the next quarter, the weakest expectation for employment since December 2002.

John Hitchins, at PricewaterhouseCoopers, said: "The recent reduction in headcount is expected to intensify in the banking, fund management and insurance sectors and all sectors expressed concerns about the level of demand affecting growth this year."

A balance of 7 per cent of companies, from banks to insurers, said business volumes were up over the past quarter, compared with a balance of 14 per cent who reported declines in business in September. In June a balance of 44 per cent had reported rising volumes.

Only about half the sectors of the financial services industry are doing well. The sectors most closely linked to the resurgent stock market tended to do best. Fund managers and securities traders saw the biggest growth in business over the past quarter, while building societies and life insurers recorded the biggest falls - although the life insurers expect the strongest growth over the next three months.

The job cuts reduced firms' costs and helped them return to profitability growth. In the previous survey, average costs per transaction rose at the fastest rate for nine years with a balance of 15 per cent. In this survey, the balance was minus 13 per cent, indicating costs fell.

Profitability improved over the last three months, with a balance of 22 per cent saying it was up, compared with a balance of 15 per cent in September reporting a fall in profitability. The survey also showed that investment intentions remained depressed.

Ian McCafferty, the CBI's chief economic adviser, said: "The sector had a very strong run up to the middle of last year. That isn't coming back in the immediate future."