CBI: Providers plan to invest in distribution

Financial services firms saw another increase in business volumes in the three months to June yet overall profitability fell unexpectedly after six quarters of robust rises, the latest Confederation of British Industry survey showed.

The CBI’s latest survey of 98 firms revealed pricing power was under pressure and costs are rising in many sub-sectors. At the same time, employment was scaled back.

But looking ahead to the next quarter, financial services firms expect business volumes to grow at a solid pace, profitability to rebound, and numbers employed to increase slightly despite providers highlighting the increased regulatory burden.

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Matthew Fell, director for competitive markets at the CBI, said: “Firms are focusing on two key strategies for growth in the near-term: finding ways to retain existing customers, by offering them more products and services, and investing in marketing, sales and distribution to attract new customers.

“But the sector is still facing a number of significant challenges. The adverse impact of regulation on business expansion has crept up the agenda and concerns about the ability of firms’ business systems to cope with new demand has risen to its highest level in 13 years.”

Optimism among life insurers improved for a fourth consecutive quarter, during the three months to June, though at the slowest pace over this period so far. Business volumes fell unexpectedly for a second consecutive quarter.

Market conditions remained challenging for life insurers, weighing on investment incomes, and the CBI noted with pricing power also under pressure profits fell markedly.

Life insurers reduced employment slightly in the quarter to June, with headcount expected to edge down at a similar pace in the three months to September.