The City has seen a number of positive indicators in recent weeks with rising levels of company floats and private equity activity. The New Year also saw the London Stock Exchange end 2021 with the highest levels of fundraising since 2007. Today a survey by the Confederation of British Industry (CBI) and PwC has revealed financial service firms saw growth pick up considerably in the most recent quarter. The survey of 105 firms including banks, insurers, brokers and investment managers found business volumes grew at the fastest rate since 2017 in the three months to December.
Profitability also increased during this time, at its fastest pace since December 2015, marking a third quarter in a row of strong growth.
The amount of activity has translated well into business for UK banks with the percentage balance reporting rising volumes of business at 44 percent, compared with 31 percent the previous quarter.
The CBI also expects rates of growth to be matched in the next quarter as well as an increase in the number of employees.
IT is likely to be a major area for investment in the next 12 months compared to areas such as land and buildings and vehicles, plants and machinery.
CBI Chief Economist Rain Newton-Smith commented: “While volumes and profitability growth across the financial services sector remain buoyant, the softening in optimism is something to watch closely, due to increased COVID-19 uncertainty clouding the near-term economic outlook.
“This uncertainty may be weighing on investment intentions in physical assets, such as buildings, although IT spending – so crucial in allowing firms to innovate and operate remotely during the pandemic – continues to be a bright spot.
“Unleashing business investment is key to powering the UK’s economic recovery, and it will be a cause for concern if firms move back from a growth mindset to focusing on survival.”
When considering constraints on investment uncertainty about demand proved to be the most common concern at 33 percent.
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Issues with labour shortages followed closely behind at 31 percent while worries about inadequate return on spending fell to 26 percent from 51 percent last quarter.
The most common workforce priority for the year ahead now among firms is maintaining talent.
Concerns around staffing also mirror figures out this week from the British Chambers of Commerce which found four out of five firms had experienced difficulties finding staff.
Isabelle Jenkins, Head of Financial Services at PwC UK, said so far the financial sector had “proved its resilience in the face of increasing change”, adding “firms should, of course, keep an eye on the underlying trends coming their way, but also ensure that key priorities, such as upskilling staff, embracing tech and enhancing customer interaction, remain high on the to-do list.”