Financial services activity slumped in Q2 – CBI Financial Services Survey

Business volumes in the financial services sector dropped at a rapid pace in the three months to June, following a temporary recovery in Q1, according to the latest CBI Financial Services Survey.   

The quarterly survey, conducted between 1 and 17 June 2026, also found that sentiment among FS firms fell in the quarter to June, as profitability contracted at a steep rate over the same period. Despite the weakness in business conditions, headcount in the sector rose for the first time since June 2024.  

Looking ahead, FS firms expect business volumes to decline at a slower, but still firm, pace next quarter. Investment intentions for IT over the year ahead improved to their strongest in nearly five years, but over half of firms cited inadequate net return as a likely factor to limit overall capex plans – the highest proportion since September 2022.   

Key findings:  

• Business volumes fell in the quarter to June at a sharp pace, marking a significant reversal from last quarter’s strong growth (weighted balance of -58% from +65% in March). Firms expect volumes to decline at a relatively slower pace over the next quarter (-32%).  
• Sentiment among FS firms dropped in the three months to June at a fast rate (-34% from +31% in March).  
• Average spreads continued to narrow at a sharp rate over Q2 2026, albeit slightly slower than in Q1 (-51% from -57% in March). Spreads are expected to fall at a markedly softer pace over the next three months (-23%).  
• The value of non-performing loans grew marginally in the quarter to June (+4% from 0% in March). Their value is set to be broadly flat over the next quarter (+3%).  
• Profitability contracted at a sharp pace in the quarter to June (-65% from +38% in March). FS firms expect profitability to continue declining rapidly next quarter (-55%).  
• Headcount rose over the three months to June (+14% from +3% in March), following seven consecutive quarters of flat/falling employment. Firms expect headcount to grow at a steady pace in the next three months (+12%).  
• FS firms expect to increase investment in IT over the next twelve months (compared to the previous twelve), to the greatest extent since September 2021. Capital expenditure on land & buildings is expected to be broadly flat, while investment in vehicles, plant & machinery is set to decline.  
• Inadequate net return was the most commonly cited factor expected to limit investment over the next 12 months, rising to its highest share since September 2022 (56% from 19% in March; long-run average of 51%).  

Louise Hellem, CBI Chief Economist, said:  

“Financial services firms saw a sharp deterioration in business conditions in Q2 following a strong start to the year. Business volumes fell at a rapid pace, which contributed to a fast decline in sentiment over the quarter. Firms did report some bright spots however, with headcount rising for the first time in two years and IT capex plans at their strongest in nearly five years.   

“The political transition underway must not slow delivery of the government’s Financial Services Growth and Competitiveness Strategy at a time when activity has deteriorated and firms are facing a more uncertain outlook. Maintaining momentum on reforms – including continuing work with the FCA and PRA to deliver a more growth focused regulatory framework – will be essential to strengthening the UK’s competitiveness and supporting investment. The forthcoming Mansion House speech provides an important opportunity to boost confidence in the reform agenda by demonstrating progress already made and setting out clear next steps for delivery.”