Britain's financial services industry is set to cut a further 15,000 jobs in the next three months to counter record falls in income and sharply declining profitability, a Confederation of British Industry survey says today.
The sector is already slashing jobs at the fastest rate since 1993 to cut costs and cope with steep falls in business volumes, the CBI said. Investment plans have also been heavily scaled back.
The CBI/PricewaterhouseCoopers survey found numbers employed in financial services in the most recent quarter fell at their fastest rate since June 1993, in the aftermath of the last recession. A similar drop is expected for this quarter, which the CBI said indicated another 15,000 cuts across the sector, not just in the City.
Ian McCafferty, the chief economic adviser at the CBI, said: "Conditions remain exceptionally tough in the financial services sector, and they have not been helped by equity markets having fallen further since our last survey in December.
"Sharp drops in revenues and profitability are causing continued suffering, while business volumes remain very weak. Firms are making heavy cuts to staff numbers and investment plans to make savings and reflect weak demand. Over the past six months, any hopes of the pain easing off have been disappointed."
Even Britain's strongest financial companies are cutting jobs. HSBC announced another 1,200 redundancies last week, with the biggest impact felt outside London, including in Newport, Wales, and Leamington Spa. Lloyds Banking Group and Royal Bank of Scotland are likely to slash thousands of jobs later this year and insurers such as Legal & General will also reduce their headcount.
Banks reduced employment at a record rate in the past quarter, and as a result total costs fell at their fastest since 1993. But further big falls in business volumes and income combined with narrowing spreads caused by record low interest rates meant that profitability dropped at a record rate.
Building societies are also taking an unusually tough line on staff cuts and costs, faced with dwindling mortgage business, rising bad debts and margins squeezed by interest rates at 0.5 per cent. Andrew Gray, banking advisory leader at PwC, said: "2009 could easily be tougher than 2008 [for building societies]. In response, the sector is developing a new commitment to cost control, although we may well see some further mergers as a further response to market pressures."
Provided by The Independent—from London, for Independent minds