Optimism has grown strongly, and profitability levels have improved, among Scotland’s financial services firm.
However, despite overall business volumes continuing to increase, the latest CBI/PwC Financial Services Survey found the pace of growth was the slowest in a year.
“The banking sector both in Scotland and across the UK is reporting growing confidence, higher levels of revenues and increasing profitability,” said Stephanie Bruce, financial services leader at PwC in Scotland.
“This is balanced by lower growth in business volumes. Banks are more positive about credit risk, as the value of non-performing loans and interest rates are expected to remain low in the coming quarter, given the economic considerations.
“Looking at the UK’s regulatory environment, companies are most concerned about cost and proportionality.
“Even so, the sector currently has a good grip on its regulatory agenda, and regulation is seen as less of an obstacle to growth than at any point last year.”
It said overall spending priorities for the next year are focused on improving IT infrastructure, part of which is cyber security.
“Building new digital platforms are part of this focus on infrastructure and are vital for most in creating the growth from new sales to existing customers and attracting new customers.
“Such platforms are being demanded by customer need but are also a significant contributor to cost management.”
Overall, 59% of the financial services firms surveyed said they were more confident than they were three months ago.
Just 9% reported a decline in confidence.
Almost a third said volumes had increased in the period, and 37% expected to see that trend continue in the current quarter.
Rain Newton-Smith, CBI director of economics, said the fortunes of financial services firms had been a “mixed picture” in the first quarter of the year.
“Firms remained upbeat as profits held up, despite weak growth in business volumes in some sectors, especially banking,” she said.
“The overall headcount in financial services fell for a second consecutive quarter, driven by banks cutting staff as they make their business operations leaner, refocusing activities as a result of new capital rules and regulatory requirements.
“Despite continuing strong growth in optimism, this survey was conducted before the Budget, so it’s possible that yet another change to the bank levy may have dented the upbeat outlook in the sector.
“Firms plan to cut their marketing spend and increase their IT investment over the next year as they focus on increasing efficiency and selling to existing customers, rather than trying to win new business.” business@thecourier.co.uk