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Tuesday 19th of May 2009
January 12, 2009

Financial services sector takes a battering


by Kay Murchie
”Financial

A survey by the Confederation of British Industry (CBI) has found that financial services companies are suffering record falls in profits.

The fourth quarter of 2008 saw a fall in business from 87 such companies, with the CBI citing 2008 as a year the financial services industry ‘would rather forget‘.

The survey, which was co-conducted by PricewaterhouseCoopers (PWC), also found that thousands of jobs are being lost each month.

The sector spans banks, building societies, insurance companies, fund managers and securities trading firms and employs approximately one million people.

According to the CBI, job losses in the sector are running at between 8,000 and 10,000 a quarter and this is expected to increase towards the middle of 2009.

John Cridland, CBI’s deputy director general, said there will be further job losses and cuts in investment as income and profitability have fallen and this will have a devastating affect on the rest of the economy.

Meanwhile, John Hitchins of PWC said not since 1998 has the UK banking sector suffered such a fall and further falls are expected as the UK moves deeper into recession.

The CBI is urging the Government to take action and said credit is the number one priority.

In related news, accountancy group Ernst & Young (E&Y) has found that profit warnings by firms listed on the London Stock Exchange reached a 7-year high last year.

E&Y said that the number of profit warnings by UK-listed companies was 449 in 2008, 17% higher than the previous year.

The economic downturn has had a major impact on almost all industries and according to the E&Y, the next 12 months looks set to be just as bad, if not worse.

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