As economic recovery beds in, the outlook for the financial services industry is getting rosier.
Last week, the International Monetary Fund upgraded its prediction for UK GDP growth to 1.4 per cent for 2013 from the 0.6 per cent it predicted back in April.
The service sector has been a particularly big beneficiary of the UK’s return to growth, with the UK’s purchase managers index indicating the fastest rate of growth in six years and as this growth continues to feed through to financial services businesses.
A recent survey of the attitude of the financial services industry by the Confederation of British Industry and PwC shows that optimism is at its highest level in 17 years and this is feeding though into an expectation of more employment.
CBI director of economics Stephen Gifford says: “With optimism rising and jobs and profitability growing, this is an encouraging quarter for the financial services sector, despite a fall in business volumes in banking.
“Firms are expecting positive momentum to carry into the next three months, alongside a strong recovery in business volumes, which will boost profits further.
“Financial services companies are less worried than they were about a potential lack of demand, but dealing with regulation is increasingly weighing on plans for business expansion.”
The CBI says number of people employed in financial services in the three months to the end of September was the highest level seen since before the credit crunch in 2007. Although the final numbers are still to come through, the CBI estimates 10,000 new jobs were created in the third quarter of the year and expects the number of new employees to increase in the last three months of this year.
The Federation of Small Businesses says that it is not just large corporations that are experiencing an upturn in confidence. Its quarterly Small Business Index reports that as confidence returns for the first time in three years more businesses are expecting to hire new employees than the number of firms looking at reducing their workforce.
Federation of Small Businesses national chairman John Allan says: “The economy needs to have confident small and big businesses to make sure jobs and wealth are being created for UK-plc. But at the same time, businesses need to have confidence in the economy to take the risk to create jobs and invest.”
Recruitment firms are also reporting a strong increase in the number of roles they are being asked to fill.
The most recent Recruitment and Employment Federation and KPMG Report on Jobs says that the job market continued to expand in September at close to the rate seen in August when new jobs grew at their fastest rate in six years.
REC CEO Kevin Green says: “This month’s figures show the jobs market continues to be the success story in the UK economy with all regions and sectors experiencing growth. Recruiters tell us that the number of people being placed into permanent roles has now been growing continually for a year and temp growth maintains its strength following last month’s 15 year high. The good news continues with starting salaries for permanent jobs rising at the fastest rate in over five and a half years and they have been rising for the last 17 months.
“This is good news but behind this success story we can see that the division in the jobs market is getting worse with vacancies going up as the number of skilled workers to fill them goes down. There is a real two speed labour market in place. We have a buoyant, candidate driven market for skilled and professional roles, versus an oversupply of candidates for jobs that don’t rely on a specific skill set.”
KPMG partner and head of business services Bernard Brown says: “With another month of data showcasing a strong rise in the number of appointments and job offers on the table, it seems that business is warming to calls for investment from Mark Carney. Improved market conditions, higher activity levels amongst clients and generally stronger levels of confidence amongst employers are certainly one of the major factors underpinning the latest rise in placements.”