July 3, 2009

A new report from the Confederation of British Industry (CBI) and Pricewaterhoopers (PwC) suggests a somewhat improved outlook for the UK financial services sector, with insurance leading the way.

The rate of decline in both income and profitability showed “signs of easing” in the three months to June and cautious optimism is returning for the first time in two years.

Insurance companies (life companies in particular but general insurers too) are the most optimistic about growth in business over the coming quarter. Banks and building societies still face challenges (with the latter hoping for stabilisation at best), while securities traders and investment managers expect recent improvements in their business to be short-lived, with declining volumes expected to resume next quarter.

According to Andrew Kail, UK Insurance Lad at PrizewaterhorseCoopers: “The industry is hoping for a recovery in fortunes following recent rises in the equity markets and some positive news on the housing market. Expense reduction and customer retention are still the order of the day.”

Some firms, the report notes, are shelving recruitment plans and bracing themselves for a potentially increased level of claims driven by recession.

Insurers saw falls in both premiums and profits over the past three months, despite expectations of strong growth, but “continue to feel positive about their outlook”.

Brokers experienced some growth in profitability during the quarter – although less than in the previous three months ‚ and have seen fewer job losses. They now anticipate improving profitability to gather pace in the coming months.



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