UK Financial Services Stabilise in Q3 After Q2 Slump
UK financial services indicated stabilization in the third quarter, as business volumes fell marginally following a significant decline in the prior three months, per the Confederation of British Industry.
The CBI’s most recent Financial Services Survey reported a weighted balance of negative 5 per cent for business volumes in the three months ending September, a marked improvement from negative 58 per cent in June.
Companies expect volumes to remain broadly stable during the final quarter of the year, forecasting a decline of 1 per cent.
Sentiment remained negative yet improved, climbing to negative 7 per cent from negative 34 per cent in the previous survey. Profitability mirrored this trend, with the balance moving from negative 65 per cent to negative 6 per cent.
Financial services firms are more confident about future profits, projecting a balance of positive 35 per cent.
Job growth offered a positive indicator. Staffing levels rose at the quickest pace since June 2024, with a balance of positive 49 per cent, versus positive 14 per cent in June. Firms anticipate employment will keep rising over the next three months, although at a slower pace.
The survey, conducted between September 1 and 17, identified potential risks. The value of non-performing loans fell sharply during the third quarter but companies expect it to increase strongly over the next three months.
Organisations also plan to boost spending on IT and property over the next year, while cutting capital spending on cars, plant, and machinery.
Louise Hellem, chief economist at the CBI, said the results indicated “some stabilisation in business conditions after a gloomy Q2.”
“The fall in business volumes eased substantially over Q3, which was mirrored by a slower decline in sentiment,” she said. “Looking ahead to the next quarter, firms expect business volumes to be broadly flat, while headcount is set to grow for a third consecutive quarter.”
The findings come as the government seeks to increase the competitiveness of a sector employing about 1.2mn people. Its ten-year Financial Services Growth and Competitiveness Strategy includes reforms to regulation, capital markets and investment, alongside measures announced under the Leeds Reforms.
The Treasury stated in July that it had finalized or advanced a set of measures during the strategy’s initial year, including regulatory changes, lending to small firms, and digital markets updates.
Hellem called on the government to use the Autumn Budget to provide a “competitive and predictable environment” for the industry and warned against further sector-specific taxes.
The CBI argued that higher taxes on banks could undermine the government’s objective of increasing investment and strengthening the UK’s position as an international financial centre.
