Published by Gbaf News
Posted on January 20, 2016
6 min readLast updated: January 22, 2026
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Overseas level of business below normal, quarterly survey finds
Growth in business volumes picked up more strongly than expected in the three months to December 2015 and profitability continued to improve at a healthy pace, according to the latest CBI/PWC Financial Services Survey.
The survey of 100 financial services firms reported that the overall level of business remained “above normal”, despite the fact that the level of business with overseas customers fell below normal to the greatest extent for three years.
The quarterly survey also found that optimism within financial services rose only slightly, following more robust increases in the first half of 2015. Strong competition is bearing down on incomes, though tight cost control is helping to support growth in profitability.
Looking ahead, weaker growth in business volumes, flat income and rising costs are expected cause growth in profits to ease in the run up to March.
Meanwhile, employment prospects remain mixed, with banks reporting falling employment, compared with solid growth in headcount in the insurance and building society sectors. Overall, expenditure on training rose strongly in the three months to December.
Rain Newton-Smith, CBI Director for Economics, said:
“Despite strong growth in profitability driven by easing cost pressures and increasing business volumes, the financial services industry is alive to downside risks from developments overseas. The global economic outlook remains uncertain while China rebalances, which is having knock-on effects on emerging markets, amidst continued unrest in the Middle East.
“While investment intentions remain robust in IT, and marketing spend is set to expand as firms seek new customers, elsewhere companies are curtailing their capital spending due to poor returns.
“There is a great deal of uncertainty within the financial services industry over the impact of Fintech. Firms in most sectors are looking to upgrade their own platforms over the next five years rather than acquire Fintech firms. However, partnerships with Fintech firms are seen as a high priority by companies in some sectors, particularly finance houses, insurance brokers and investment managers.”
Kevin Burrowes, UK financial services leader at PwC, said:
“We see the emerging trend of firms making more investment in new products. Another positive is that IT investment is moving from regulatory spend to front line systems to help overcome the rise of new competition.
“Also, it’s clear that optimism is muted across the whole sector and each sub-sector has its own challenges. Ongoing low interest rates, cost of floods claims, the continuing slump in oil prices and the domino effect of stock market volatility are responsible for the increased pessimism compared to this time last year.
“Cost reduction therefore remains a major focus but we see the issue of firms developing new products and making IT investments to fight off the rise of new competition as a new emerging trend.
“Against this backdrop, the growing spectre of cyber-crime looms large and the threat of major attacks continues to stalk the entire financial services industry.
“This is borne out by recent research which found that UK bankers and market watchers now put fears about cyber-crime at the top of a list of 24 possible risks to banks, eclipsing doubts about heavy-handed regulation for the first time.”
Key findings:
Incomes, costs, profits:
Employment:
The next 12 months:
In the year ahead, financial services firms expect to scale back non-IT capital spending, though investment in Information Technology and marketing spending is set to rise:
The main reasons for authorising investment are cited as:
Providing new services (52%)
The main factors likely to limit capital authorisations are cited as:
The main factors likely to constrain business over the next year are:
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