Jobs in financial sector cut at fastest rate since 1993
Jobs in the financial sector have been cut at their fastest rate since 1993 – and the trend is expected to continue.
A survey has revealed that 40 per cent of firms have had a reduction in their workforce alongside a record drop in income levels and business volumes.
Staff numbers are expected to fall by a similar amount over the coming quarter, as almost 40 per cent of businesses said they were less optimistic about the financial situation than in December.
The survey, conducted by CBI/PWC Financial Services, revealed that 56 per cent of firms saw their business volumes drop in the first three months of this year, with only nine per cent reporting an increase.
Profitability has continued to decline, with 47 per cent of firms confirming a loss, but this has improved compared to December’s record drop of 55 per cent.
CBI chief economic adviser Ian McCafferty said the sharp drops in revenues and profitability were causing continued suffering.
“Conditions remain exceptionally tough in the financial services sector, and have not been helped by equity markets having fallen further since December,” he said.
“Over the past six months any hopes of the pain easing off have been disappointed but conditions in the sector are not uniformly bad, as many general insurers fared quite well.”
A net 53 per cent of firms had a drop in fee, commission and premium incomes while a balance of 54 per cent saw falls in net interest, investment and trading incomes.
The values of these two income categories have fallen at the fastest rate since December 1989.
Both are forecast to continue to fall in the next quarter but a more moderate rate is expected for fee, commission and premium incomes.
Uncertainty about demand has meant businesses scaling back investment plans in land and buildings over the next 12 months.
Cutbacks in spending are also expected on vehicles, plant & machinery.
The survey has also revealed that twice as many firms now believe the credit crunch will have a further deterioration in the financial market conditions.
Moreover, every business surveyed believes it will take more than six months for the market to resume to normal conditions.
Mark Smith, regional chairman at Pricewaterhouse Coopers LLP in the Midlands, said: “Financial services organisations in the region continue to feel the effects of the credit crunch and there have been significant job losses.
“However, there is some cautious hope for stabilisation in the coming quarter. In the medium, we are hoping that Midlands-based lenders in the region will become increasingly confident when allocating credit to local businesses and individuals.”
