--CBI: 30% UK finance firms report Q4 business volumes up; Q3 13%
--CBI says UK financial services firms optimism remains stable
By BridgeNews
London--Jan.8--Financial services companies reported an unexpectedly big jump in business volumes in the fourth quarter of 2000, according to the latest Confederation of British Industry/PricewaterhouseCoopers survey. Although firms predicted the pace of growth would slow in the coming months, the survey findings appear at odds with forecasts of an abrupt slowdown in economic activity and the CBI's call over the weekend for an interest rate cut this week. * * * The survey said 45% of firms reported business volumes up in the fourth quarter and 15% said they were down. This gives a balance of positive 30%, compared with a balance of 13% in September and 52% at the same time last year. Sudhir Junankar, CBI associate director of economic analysis, played down the significance of reported actual business volume, choosing instead to concentrate on the forward-looking balances. "Financial services firms were surprised by the buoyancy of business volumes, but they expect this to ease in the early part of this year. With profits set to come under pressure, business confidence is just holding steady," he said. The survey found a positive balance of 2% of firms were more optimistic about the business situation than they were three months ago, compared with a positive balance of 3% in September and 21% at the same time a year ago. Some of the perceived erosion in confidence may have been attributable to the slowdown in profit growth and expectations of further falls to come. Employment grew modestly in the last quarter and is expected to increase slightly in the first quarter of this year, the survey said. Banks and building societies expect a net fall in employment but this should be more than offset by a rise in general, and life insurance and fund management employment. The survey also found that e-business developments had failed to live up to expectations in recent months. The CBI said e-business had been slower to sink its roots into the services sector and that companies were now more relaxed about new entrants stealing market share. "The survey clearly shows that some of the e-business expectations of a year ago may have been inflated. Having scaled back their short-term ambitions, companies are more sanguine about threats from new entrants," Ian Dilts, PricewaterhouseCoopers partner, said. The survey appears to confirm that the financial services sector remains very healthy, although companies are becoming a little more nervous about the outlook. It is likely to support the view that the U.K. economy is in a good state but there are mounting risks of a slowdown on the horizon. The CBI said that the evidence from the survey did not weaken its call at the weekend for U.K. interest rates to be cut this week. The CBI's Junankar commented that although the financial services optimism index was unchanged on the quarter, the fieldwork for the survey was conducted at the beginning of December, before the outlook for the U.S. economy deteriorated sharply. The Bank of England's Monetary Policy Committee holds its first monthly meeting of this year on Wednesday and Thursday. Despite the U.S. Fed's surprise rate cut last week, the MPC is expected to leave rates on hold at 6.0% this month. A cut in February, however, is considered an increasing likelihood.