LONDON (Dow Jones)–Financial services firms operating within the U.K. expect you’ll cut investment and slash jobs in the first quarter of the year responding to greater competition, tougher regulation as well as a weakening global economy, in accordance with market research published Monday.
A survey of 106 banks, insurers and asset managers through the Confederation of British Industry, an employers’ group, and business services firm PricewaterhouseCoopers found firms enjoyed better-than-expected earnings within the final quarter of 2011 but expect business this season to become tougher.
The sovereign debt crisis roiling the euro zone is constantly on the overshadow the, survey respondents said. The problems banks face getting funding as a consequence of investor nervousness regarding their potential losses from bad euro-zone government loans was handed as the main reasons more likely to crimp investment in 2012. Weak demand for financial services and greater competition will likely limit business expansion, firms said.
Ian McCafferty, the CBI’s chief economic adviser, told reporters financial services companies shed about 9,000 jobs within the U.K. inside final three months of 2011 as well as the CBI expects another 11,000 job losses within the first quarter on this year. There was about 1.04 million people utilized in financial services at the conclusion of 2011.
The survey found firms experienced stronger-than-expected rise in business volumes inside the final quarter of 2011, largely a consequence of greater activity in febrile markets. Banks said business volumes were higher than normal the first time since June 2007. Income from interest, investment and trading grew with the quickest pace since June 2006, survey respondents said, while fees and commissions also rose, boosting profits.
Survey respondents said they expect business volumes and income to keep expanding within the first quarter, albeit in a much slower pace. And those expectations are tempered by increasing pessimism concerning the strength in the global economy.
“Firms are less optimistic, employment is down and investment intentions for this year are weaker, as concerns in regards to the global recovery and ongoing troubles in the euro zone create uncertainty,” McCafferty said. The contributes between 10% and 12% for the U.K.’s annual gdp, and McCafferty said first-quarter output may be held back if funding conditions mean banks can’t receive the capital to fuel growth elsewhere throughout the economy.
The survey found an area where firms do be prepared to channel investment is in complying with regulations. Financial services firms inside the U.K. face a slew of the latest rules, starting from higher capital requirements for banks and insurers to stricter consumer protection requirements for financial advisers. Many receive force at the outset of 2013.
And in the ominous sign for your U.K. economy in 2012, laptop computer also found banks expect bad loans to elevate this coming year, particularly in their retail loan books.