Financial services firms have enjoyed another quarter of strong growth, but are less optimistic about business in the coming three months.
That's according to the latest Financial Services Survey published by the CBI and accountants PricewaterhouseCoopers.
However, ongoing recruitment and strong investment intentions suggest that confidence about the longer-term outlook has held up.
In the three months to June, business volumes grew at their fastest rate in two years.
Some 50 per cent of firms said volumes had grown with just six per cent reporting a decrease.
A balance of 28 per cent of respondents said profitability had risen in the last three months, whilst 23 per cent reported increases in net interest, investment or trading income.
However, firms expect a tougher three months ahead with the balance of firms saying business volumes will rise being just four per cent, and a balance of five per cent of firms that expect profitability to fall. The quarterly survey showed that a net eight per cent of firms were less optimistic about business conditions in their sector than three months ago.
There is a clear split in short-term expectations, with banks predicting continued expansion but securities traders and fund managers expecting sharp declines along with building societies. This suggests that the stock market wobbles seen recently in the UK have heavily influenced sentiment, alongside mixed signals from the housing market.
In e-business, a net 73 per cent said the value of internet business had increased, and a balance of 69 per cent expect it to continue growing in the next three months.
Doug Godden, head of economic analysis at the CBI, said: "The balance of optimism may have shifted, but this has been the financial sector's fourth consecutive quarter of strong expansion at a time when the picture in the rest of the UK economy has been patchy."
David Waller, Midlands chairman at PricewaterhouseCoopers, said: "Among the sectors experiencing a drop-off in confidence, the major driver of change has been recent falls in the equity markets. However, given that equity values remain at year-end 2005 levels, the dip in sentiment could represent a short-term over-reaction.
"IT investment intentions reached their highest level for eight years and employment trends also remain positive, with most major sectors expecting either to maintain or expand their staffing levels in the coming quarter." ..SUPL: