Financial service activity has stabilised in the second quarter of 2018, according to new data.
The latest Confederation of British Industry (CBI)/PWC Financial Services Survey has revealed hiring picked up for the second consecutive quarter.
Employment across the financial services sector as a whole increased for a second consecutive quarter, at the fastest pace for a year.
The only sector cutting back headcount was building societies.
Overall employment is expected to increase further over the coming quarter.
Investment intentions for the year ahead improved, with marketing budgets increasing, and investment in IT anticipated to increase at the fastest pace in more than three years, motivated by a mixture of new service provision, efficiency improvements and regulatory compliance.
In fact, the share of firms investing to provide new services was the highest in three years.
Rain Newton-Smith, chief economist at CBI, said: "Despite fairly subdued growth last quarter, it is good to see financial firms stepping up hiring and investment, with digital technologies and new services seen as the best way to grow in a fiercely competitive environment.
"The UK's financial services is the jewel in the crown of the British economy, and is an engine for growth in other parts of the economy across the country.
"Yet it is impossible to ignore the fact that three years have now passed since we have seen any significant improvement in overall sentiment in financial services."
However, the quarterly survey of 100 firms found that optimism about the overall business situation in the financial services sector showed no improvement, having fallen in all but one quarter since the beginning of 2016.
Sentiment was unchanged in banking, building societies and investment management, but improved in finance houses and general insurance.
Overall business volumes were flat. While building societies reported that volumes rebounded, after falling in the previous quarter, volumes were unchanged in banking, and grew at a fairly tepid pace in general insurance and investment management.
Looking ahead, overall business volumes are expected to pick up marginally over the coming three months.
Andrew Kail, head of financial services at PWC, said: "Optimism amongst financial services has remained subdued and growth in business volumes has weakened. Profitability was also stable, following strong growth over the last year.
"There is a hive of activity among firms bedding in sweeping regulatory requirements including GDPR and PSD2. Businesses expect regulatory spending to continue increasing over the next 12 months. It is currently marked as their most important barrier to growth."
Profits in the sector as a whole were largely flat in the quarter to June, with the lending sectors, such as banks, building societies, and finance houses, seeing minimal or no growth, although parts of the insurance sector and investment management saw profits improve.
But overall profitability is expected to grow only moderately in the three months ahead.
Scott Gallacher, chartered financial planner at Leicester-based Rowley Turton, said: "Financial services does seem very buoyant at the moment, with most firms I speak to doing really well, so I am not surprised to see this reflected in the figures.
"Earlier this year we recruited an additional administrator and we are now in the middle of recruiting some maternity cover, but this could also turn into a permanent addition in due course."
aamina.zafar@ft.com
