Income and profitability levels in the UK financial services sector fell at record rates as the recession deepens and the credit crunch continues to bite, a new survey published by PriceWaterhouseCoopers and the CBI reveals.
In a clear sign that tightened credit markets are hitting the wider economy, the amount of business conducted with manufacturers, retailers and other commercial firms also shrank at a record rate, while job losses mounted and investment plans were cut.
Asked how their business volumes fared in the three months to early December, 17 per cent of firms responding to the CBI / PWC Financial Services Survey said that volumes rose, while 59 per cent said they fell.
The resulting balance of -42% continued a year-long run of steep declines and was worse than firms had expected. A balance of 25% expect volumes to fall further over the next three months. (A balance is the difference between the percentage of firms reporting an increase and those reporting a decrease).
Profitability in the sector declined at a record rate for the second survey running, with a balance of 55% of firms reporting a fall. Looking forward, the rate of profit decline is expected to slow, as a net 19% of firms predict profits will drop over the coming three months.
The values of two income categories captured by the survey both fell at the fastest rate since the survey was launched in December 1989. A net 51% of firms reported a drop in fee, commission and premium incomes, while a balance of 48% saw falls in net interest, investment and trading incomes. These rates were worse than predicted but more moderate falls are anticipated in the next three months.
www.pwc.co.uk
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