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CBI survey sees profits tumble for life offices and fund firms

Financial services companies have been hit hard by the economic downturn, suffering their biggest fall in profits for almost a decade, according to figures from the CBI.

Its quarterly survey with PricewaterhouseCoopers shows business volumes have been falling at their fastest pace for nine years, forcing many companies to cut capital expenditure and marketing costs in a bid to sustain profitability.

In the three months to December last year, 42 per cent of companies suffered a fall in business volumes, while only 34 per cent experienced an upturn.

The CBI says the balance of -8 per cent is the worst figure since 1992.

Among the poorest performing were life offices and fund managers, which suffered dramatic slumps in business volumes.

Life offices reported a sharp fall in optimism, prompting Pricewater-houseCoopers to say it fears that the sector has some significant challenges ahead in the 1 per cent stakeholder world.

Fund managers are bullish about their prospects despite the fall in volumes, saying they expect profits to bounce back over the next three months as they seek to slash expenditure on employment and technology.

But building societies&#39 confidence about profitability over the next three months has fallen to its lowest ebb since December 1997 despite it being one of the few sectors exp-eriencing a growth in business volumes.

CBI chief economic adviser Ian McCafferty says: “These worrying findings show the normally resilient financial services sector counting the cost of the global slowdown. Firms are seeing profit margins squeezed and they are responding by seeking ways to reduce their cost base.”


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