Employment Grows at the Quickest Rate since 2006 - CBI Financial Services Survey

In the three months to June, headcount across the FS sector grew at its fastest rate since December 2006, according to the latest CBI Financial Services Survey. Firms expect employment growth to continue into the following quarter, albeit at a slightly reduced pace.

The quarterly survey, conducted between 31 May and 16 June 2023 with 128 respondents, found that this rise in headcount was underpinned by buoyant optimism and the fastest growth in business volumes since December 2021. Firms expect business volumes to increase at a brisk pace in the three months ahead.

Key findings:

• Optimism continued to grow at a fast pace in the quarter to June (weighted balance of +30% from +44% in March).
• Business volumes growth accelerated in the quarter to June (+42% from +12% in March) to its fastest pace since December 2021. FS firms expect volumes to continue to increase rapidly next quarter (+37%).
• Average spreads were flat in the three months to June (0% from +22% in March). Spreads are expected to grow modestly next quarter (+6%).
• The value of non-performing loans was unchanged in the quarter to June (0% from -12% in March) but is anticipated to increase next quarter (+21%).
• Profitability in the quarter to June (+41% from +27% in March) grew at its quickest pace since December 2021. Profitability growth is expected to remain solid next quarter (+22%).
• Employment in the quarter to June (+52% from -7% in March) grew at its fastest rate since December 2006. Firms expect headcount growth to continue to be quick next quarter (+28%).
• Firms expect to increase investment in IT over the next 12 months (compared to the last 12), while capital expenditures on land & buildings and vehicles, plant & machinery is anticipated to decline.
• Uncertainty about demand was the most commonly cited factor likely to limit investment in the next 12 months (59%). Concerns about labour shortages were at their most widespread on record (57%), while the share of firms citing cost of finance (11%) rose to its highest since December 2020.

Anna Leach, CBI Deputy Chief Economist said:

“The improvement in financial services activity this quarter is positive news, with volumes growing sharply and sentiment ticking upwards across the sector. The fact that so many businesses are looking to bring in fresh talent is welcome and provides further evidence of growing confidence among FS firms.

“The recent passing of the Financial Services and Markets Act, the signing of a Memorandum of Understanding between the UK and EU on financial services, and the International Sustainability Standards Board recent publications all mark positive and important steps for the sector. However, firms still need clarity regarding how these will both impact day-to-day operations and shape a more competitive regulatory environment moving forward.”