LONDON (Reuters) – Britain’s financial sector reported the biggest upsurge in business in nearly 20 years in the final three months of last year, the Confederation of British Industry said on Monday.
The CBI said its quarterly financial services business volume index rose to +57 in December from +49 in September and its highest since December 1996.
“The upswing in growth among financial services firms continues on a solid footing, with overall optimism, business volumes and profits up,” said Rain Newton-Smith, the CBI’s director of economics.
The upbeat figures contrast with official data, which showed that financial services output in the three months to October was 3.2 per cent lower than a year earlier.
Separate forecasts from accountants Ernst & Young, also released on Monday, show that tumbling oil prices should help Britain’s economy as a whole to grow by 2.9 per cent this year, half a percentage point faster than thought in October.
“While it is not a game changer in terms of growth prospects, falling oil prices come just as the recovery was losing momentum and will move the game up to a higher level for a year or two,” said Peter Spencer, an advisor to Ernst & Young.
The CBI survey of lenders, brokers, insurers and asset managers showed that the sector was still cutting jobs, led by the banking and life insurance sectors, though there were skills shortages in some areas such as compliance.
Financial services account for around 10 per cent of Britain’s economy, a larger share than in other big economies, but the sector has struggled to recover from the 2008-09 crisis.
Mutually owned building societies, which often specialise in mortgage lending, reported a poor quarter due to tighter lending regulations earlier in the year and high house prices relative to incomes in London and southeastern England.
“A strengthening of household finances, continued low interest rates and the recent changes to stamp duty (property transaction tax) suggest that conditions in the sector should pick up ahead,” Newton-Smith said.