Financial services hit by falling activity and sharp drop in sentiment - CBI Financial Services Survey

Business volumes in the financial services sector fell at the fastest rate since December 2023 in the second quarter of 2025, according to the latest CBI Financial Services Survey. Optimism also declined at its steepest pace since September 2022.

The quarterly survey, conducted between 29 May and 16 June, found that FS firms expect activity to stabilise next quarter, with volumes set to be broadly unchanged. However, headcount is expected to decline at a rapid pace, and investment intentions remain poor – reflecting heightened economic uncertainty and the ongoing impact of last year’s Autumn Budget measures.

Key findings:

• Business volumes declined in the quarter to June (weighted balance of -24% from +5% in March) at the fastest rate since Q4 2023. Firms expect volumes to be broadly unchanged in the quarter to September (+3%).
• Optimism fell sharply in June, at the steepest pace since September 2022 (-55% from -8% in March).
• Average spreads narrowed in the quarter to June, though at a slower pace than in March (-22% from -38%), and are expected to be flat over the next three months (-1%).
• The value of non-performing loans fell in the quarter to June at the fastest rate since September 2021 (-20% from 0% in March). Their value is anticipated to decrease at a similarly firm pace over the next three months (-21%).
• Profitability declined at a steeper pace in the quarter to June relative to March (-24% from -9%). FS firms expect profitability to rise modestly over the next three months (+9%).
• Headcount fell in the quarter to June (-7%), after being broadly unchanged in the previous quarter (+2%). Firms expect headcount to decline at a significantly steeper rate in the three months to September (-52%).
• Firms expect to reduce investment in land & buildings and vehicles, plant & machinery over the next 12 months (compared to the last 12). Meanwhile, capital expenditure in IT is set to rise modestly.
  • Uncertainty about demand was the most commonly cited factor expected to limit investment over the next 12 months (55% from 42%; long-run average of 48%)
  • Almost half of firms reported that “other” factors were likely to limit investment (45% from 36% in March; long-run average of 8%). Comments suggested that the volatile economic climate, regulation, and Autumn Budget measures were weighing on capex plans.

Alpesh Paleja, Deputy Chief Economist, CBI said:

“Conditions deteriorated in the FS sector over the second quarter, with business volumes falling at their fastest pace since late 2023 and sentiment dropping sharply. Profitability was squeezed further, as firms faced narrowing spreads. While activity is projected to stabilise next quarter, firms still expect to cut back on hiring and investment going forward.

“In light of our latest survey data, we look forward to the Financial Services Growth & Competitiveness Strategy and urge its swift implementation to bolster the UK’s competitive edge. But firms facing continued economic uncertainty now will be looking ahead to the Chancellor’s Mansion House speech and to the Autumn Budget for reassurances, particularly that the burden of potential tax rises doesn’t fall squarely on their shoulders.

“Given the Employment Rights Bill also poses further pressure on firms, it’s critical that government give financial services the clarity and confidence needed to achieve its Growth Mission.”