Financial services firms grew steadily in the first quarter of 2014, according to a survey by the Confederation of British Industry (CBI) and PwC. Overall, 41% of firms said they felt more optimistic than three months previously and 32% reported increased business volumes. Just 7% felt gloomier about their prospects than at the end of the previous quarter.
Looking ahead to this quarter, 49% of firms expect business volumes to increase, while 3% say they will decrease.
In the last quarter of 2013, employment in the financial services sector expanded at its strongest pace in six years. Hiring stayed at a similarly strong rate in the three months until March 2014 and it is likely to pick up further this quarter.
Financial services firms appear to have positive investment intentions for the next 12 months with expenditure on IT expected to grow most rapidly. The main factors driving investment are a desire for increased efficiency (in 71% of firms), replacement (61%) and the provision of new services (61%). Capital spending is expected to increase across the board, with IT investment set to grow by 50%, marketing expenditure due to increase by 42% and spending on land and buildings likely to jump by 21%.
Growth is predicted for this quarter in all sectors of financial services except insurance. According to the research, the main factors likely to constrain financial services businesses over the next year are competition (cited by 63% of firms), level of demand (59%) and statutory legislation and regulation (48%). They are also concerned about the availability of professional staff (38%) and the adequacy of their systems capacity (34%).
Matthew Fell, CBI director for competitive markets, said: "Financial services firms are growing steadily and are optimistic about their business situation. The fact that competition is growing as a potential business constraint highlights intensifying activity in the sector.
He added: "Businesses plan to spend heavily on IT and are scrambling to find new professional staff to meet growth demands."
Sally Percy is editor of The Treasurer