Workers in banks, insurance companies and asset management firms are bracing themselves for a continued slowdown in growth that is likely to lead to job losses in the next quarter.
According to a survey from PricewaterhouseCoopers (PwC), the pace of growth in the financial services sector slowed in the three months ending in September and will slacken ever more in the coming quarter, when firms predict no increase in profitability.
A fifth of financial services companies in the survey are less optimistic than three months ago, the first time confidence has fallen back since March 2009.
“After a torrid couple of months on global financial markets, the mood has clearly darkened,” said Ian McCafferty, chief economic adviser.
“With business volumes predicted to slow further and little growth in income expected, firms are planning to reduce their headcount in the next quarter.”
In the investment management sector, business volumes rose for the tenth consecutive quarter and profitability rose marginally, although the increase failed to meet expectations. Investment managers said they expected business to be flat in the next three months.
PwC said the volume of securities trading recovered well, potentially buoyed by recent volatility. But a small increase in income was outweighed by rising operating costs, which caused a decline in profitability. This could force firms to make layoffs for the first time in two years.
Securities traders said flagging demand and regulatory challenges are the factors most likely to limit business expansion in the next twelve months, and said capital expenditure plans for that period were negative.
“The continued uncertainty of sovereign debt markets and the risk of greater market turmoil are leading many securities traders to report downbeat predictions for volumes and revenues,” said Pars Purewal, UK asset management leader at PwC.
“Many in the industry expect that the full effects of the European sovereign debt crisis are yet to materialise and this is leading to a cautious outlook, with job losses looking likely.”
©2011 funds europe