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Few signs of banking recovery in CBI/PwC and Ernst & Young studies..

City of London
European Central Bank

London: Studies published this week by two of the UK's biggest professional services groups offer only limited encouragement for the financial services industry across Europe.

The volume of business in UK financial services grew for the seventh quarter running and at the fastest pace since June 2007, in the three months to December, according to the latest CBI/PwC Financial Services Survey.

In the next three months firms expect business to continue growing, albeit at a slightly slower pace. However this positive picture is tempered by a fall in sentiment and employment levels in this quarter. Firms also say that they plan to invest less over the coming year.

Ian McCafferty, CBI Chief Economic Adviser, said, "This has been a strong quarter for the financial services sector, with increases in sales volumes and profits showing that the sector's recovery is on track.

"But firms are less optimistic, employment is down and investment intentions for next year are weaker, as concerns about the global recovery and ongoing troubles in the Eurozone create uncertainty."

Meanwhile, the Ernst & Young Eurozone financial services forecast predicts that solvency will remain an acute concern throughout the region in 2012, despite the recent positive action taken by the European Central Bank.

The forecast for lending in the Eurozone has been significantly downgraded, institutions will be forced to fight over retail deposits and the resulting repatriation of capital is likely to hit Eastern Europe hard in particular, potentially pushing some economies in the region into recession.

Full details of the CBI/ PwC survey are available here.

The Ernst & Young forecast is available here.

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