Financial services cut jobs as incomes and business levels fall sharply - PWC

The UK financial services sector has been hit by record drops in income levels while business volumes have continued to fall sharply, according to the latest CBI/PWC Financial Services Survey released this week. The industry has cut jobs at the fastest rate since 1993 to try and trim costs and alleviate steep falls in profitability. Investment plans have also been heavily scaled back, the survey concluded.

Asked how their business volumes fared in the three months to early March, 9% of firms responding to the survey said that volumes rose, while 56% reported a fall. The ensuing balance of -47% marked a sixth quarter of steep declines and was worse than firms had expected (-25%). Some 10% of the respondents expects volumes to drop further over the next three months. Another 47% reported a decline in profitability, which reflected a slight easing from December's record drop of 55%. A further slowing in the decline is expected over the three months ahead (-27%).

'The health of the financial services sector is hugely significant for the real estate industry. First, as lenders to the real estate industry - normal transactional activity will not return to the market until debt liquidity returns,' commented John Forbes, Real Estate Industry Leader for EMEA at PWC. 'Secondly, in London and Edinburgh particularly, but also more broadly, financial services companies are major occupiers of property. The sector is also a key driver of the broader economy, as an employer, but also through the impact that the availability of mortgages finance has on house prices and via that on consumer spending.'

Business sentiment dropped again, as a balance of 34% of firms said they were less optimistic about the overall business situation in the financial services sector than they were in December.

With a balance of 40% of firms reporting a reduction in headcount, the numbers employed in financial services fell at their heaviest rate since June 1993
(-41%). Staff turnover dropped for the fourth quarter running, reflecting nervousness about switching jobs and a shortage of vacancies. Expenditure on staff training continued to fall and is expected to be cut more heavily over the next three months.