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Saturday 11th of July 2009
March 30, 2009

CBI: Thousands of jobs to be axed in financial services

by Kay Murchie

A survey conducted by the Confederation of British Industry (CBI) has revealed that banks and other financial institutions are expected to cut a further 15,000 jobs in the next three months.

According to the organisation, approximately 15,000 jobs have already been axed in the industry in the first quarter of this year, which will take the total to 30,000 by the end of June.

The job cuts are a result of the turmoil in world markets and a fall in demand in the UK continues to undermine profits, said the CBI.

The CBI said financial services firms are looking to scale back and investment plans and marketing budgets have been slashed, as well as headcount.

Ian McCafferty, the CBI’s chief economic adviser, said: “Conditions remain exceptionally tough in the financial services sector, and have not been helped by equity markets having fallen further since our last survey in December.

“Sharp drops in revenues and profitability are causing continued suffering, while business volumes remain very weak. Firms are making heavy cuts to staff numbers and investment plans to make savings and reflect weak demand.”

However, insurers may fare slightly better since sales of motor and home insurance will hold up, largely due to customers having to take these types of insurance as agreed with their mortgage lender. Consequently, general insurers may seen an increase in headcount over next 12 months.

Meanwhile, the UK’s building societies have been relatively unscathed by the problems within the financial sector but recently, several small societies have been rescued by their larger rivals.

Today, it was confirmed that Nationwide is to buy the Dunfermline Building Society’s branches, good loans and deposits.

According to Andrew Gray, banking advisory leader at PricewaterhouseCoopers, this year could be tougher than last year for the UK’s building societies and further mergers could arise as a result of market pressures.

Finally, the survey found that business confidence had waned since a balance of 34% of firms said they were less optimistic about the overall business situation in the financial services sector than they were in December.

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