More City of London Job Losses Coming: CBI Survey
Business levels are retuning to normal after four years of decline, a leading survey of financial services firms found on Monday, but there will be more job cuts in the City of London this quarter as uncertainty over the euro zone debt crisis continues.
The quarterly PricewaterhouseCoopers (PwC)/Confederation of British Industry (CBI) Financial Services Survey found the volume of business in UK financial services grew for the seventh quarter in a row and at the fastest pace since June 2007, in the three months to December.
The level of business was also seen as being normal, after being regarded as below par since September 2007.
The first quarter of 2012 was expected to see a continuation of this more positive trend, albeit at a slightly slower pace, the survey added.
However, business leaders also predicted a fall in sentiment and employment levels. And firms told the survey they planned to invest less over the coming year.
Up to 11,000 jobs in the City are expected to be cut in the first quarter of 2012. That follows the axing of 9,000 jobs in the last quarter, taking the total for the six months to the end of March to 20,000 should those predictions prove accurate. The figures would also take the total number of job losses in the City to 101,000 since the collapse of Lehman Brothers three years ago.
“This has been a strong quarter for the financial services sector, with increases in sales volumes and profits showing that the sector’s recovery is on track,” Ian McCafferty, chief economic adviser at the CBI said. “But firms are less optimistic, employment is down and investment intentions for this year are weaker, as concerns about the global recovery and ongoing troubles in the euro zone create uncertainty.”
Of the 106 financial companies surveyed, 53 percent said they saw volumes rise in the fourth quarter of last year, compared with 24 percent which reported a drop in volumes. Almost a fifth (19 percent) of firms said they expected volumes to continue to increase next quarter but at a slower pace.
Moreover, 28 percent of firms which took part in the survey said the value of fee, commission and premium income had grown, while 24 percent said the value of income from net interest, investment and trading grew in the three months to December, the fastest pace since June 2006 and December 2005, respectively. Both types of income are expected to grow in the next quarter.
The rise in volumes and income helped push up profitability for the tenth consecutive quarter; 36 percent of firms reported a rise in profitability compared with 22 percent which reported a fall.
However, optimism in financial services was lower among 24 percent of firms than three months ago and employment was also down 13 percent, with 18 percent of firms predicting a faster decline this quarter.
Almost a third (29 percent) of companies said they would invest less on land and buildings and just over a fifth (21 percent) of firms said they would spend less on vehicles, plants & machinery over the course of the year.
Shortage of finance, uncertainty about demand and business prospects, and inadequate return on investment were seen as the factors most likely to limit investment.
“These latest results show pessimism for the coming months, although banks have responded that they have seen high levels of business volumes and income over the recent period. We anticipate that this pessimism will translate into increasing concern over non-performing loans in 2012,” said Kevin Burrowes, UK financial services leader at PwC.
"Banks have also shown a marked acceptance that there will be increased competition in the UK,” he said. “Regulatory changes remain high up the agenda and will absorb significant management time, and [spending] on this will be very high throughout the year. Further job losses across the sector seem inevitable as banks seek to manage their cost base.”
The survey comes on the same day that as a report in the Financial Times revealed the investment arm of state-owned Royal bank of Scotland was to award its chief executive, John Hourican, a special bonus of $6.1 million and a day after Prime Minister David Cameron said the government would take action to curb the bonuses of top executives in the City and give shareholders more power over remuneration packages.