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Finance sector 'sees improvement' | Finance sector 'sees improvement' |
(about 4 hours later) | |
There are signs that the financial services sector is emerging from the worst of the downturn, a quarterly survey from the CBI suggests. | There are signs that the financial services sector is emerging from the worst of the downturn, a quarterly survey from the CBI suggests. |
The UK's finance services sector could be on a "gradual" road to recovery, said the survey by the business group. | The UK's finance services sector could be on a "gradual" road to recovery, said the survey by the business group. |
Incomes and profitability fell in the three months to June, but at a lower rate and business volumes are tipped to rise in the next quarter, said the CBI. | Incomes and profitability fell in the three months to June, but at a lower rate and business volumes are tipped to rise in the next quarter, said the CBI. |
But the group warned of "significant job losses" ahead and investment cuts. | But the group warned of "significant job losses" ahead and investment cuts. |
And the business group said conditions for banks remained tough, with rising debt levels a further concern for the industry. | And the business group said conditions for banks remained tough, with rising debt levels a further concern for the industry. |
'Lower profitability' | 'Lower profitability' |
Finance sector firms saw lower business volumes in the quarter to June, but it was not as bad as that seen in the three months before. | Finance sector firms saw lower business volumes in the quarter to June, but it was not as bad as that seen in the three months before. |
Of those surveyed some 22% saw business volumes climb in the period to June, and 50% saw business volumes drop. | Of those surveyed some 22% saw business volumes climb in the period to June, and 50% saw business volumes drop. |
The balance of 28% seeing contraction was less than the 47% seeing a fall in the quarter to March. | The balance of 28% seeing contraction was less than the 47% seeing a fall in the quarter to March. |
"Having seen business volumes tumble continuously for 21 months, some parts of the financial services sector look like they may be starting to come through the worst," said CBI chief economist Ian McCafferty. | |
However, he added: "We can still expect lower profitability, significant job losses and cuts to investment in the coming months". | However, he added: "We can still expect lower profitability, significant job losses and cuts to investment in the coming months". |
On the upside, firms were more positive regarding the next three months about business volumes than they have been since March 2007 as 29% of firms predict an increase, while 18% foresee a fall. | On the upside, firms were more positive regarding the next three months about business volumes than they have been since March 2007 as 29% of firms predict an increase, while 18% foresee a fall. |
'Worst may be over' | 'Worst may be over' |
And a balance of 13% of firms were more upbeat regarding the general business outlook than in the previous quarter - marking the first rise in two years. | And a balance of 13% of firms were more upbeat regarding the general business outlook than in the previous quarter - marking the first rise in two years. |
The UK economy is stabilising but it will not be until early next year that a "slow and gradual" recovery will begin, business leaders have said. | The UK economy is stabilising but it will not be until early next year that a "slow and gradual" recovery will begin, business leaders have said. |
The economy will contract by 3.9% over 2009 before seeing a return to growth of 0.7% next year, the CBI predicted. | The economy will contract by 3.9% over 2009 before seeing a return to growth of 0.7% next year, the CBI predicted. |
"The harshest period of the recession looks to be behind us," said CBI director general Richard Lambert. | "The harshest period of the recession looks to be behind us," said CBI director general Richard Lambert. |
But he warned people against getting carried away by talk of "green shoots" in the economy. | But he warned people against getting carried away by talk of "green shoots" in the economy. |
In the Budget, the chancellor forecast the economy would shrink by 3.5% this year before expanding by 1.25% in 2010. | In the Budget, the chancellor forecast the economy would shrink by 3.5% this year before expanding by 1.25% in 2010. |
Of the CBI's less optimistic forecast, Mr Lambert said: "The return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behaviour. | Of the CBI's less optimistic forecast, Mr Lambert said: "The return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behaviour. |
"For positive growth to return, lenders need to feel more confident so that credit can start flowing again." | "For positive growth to return, lenders need to feel more confident so that credit can start flowing again." |
Some commentators have been carried away by recent tentative indicators as evidence of 'green shoots' Richard Lambert, CBI director general | Some commentators have been carried away by recent tentative indicators as evidence of 'green shoots' Richard Lambert, CBI director general |
Last week, the National Institute of Economic and Social Research (NIESR) estimated that the UK economy resumed growth in April and May. | Last week, the National Institute of Economic and Social Research (NIESR) estimated that the UK economy resumed growth in April and May. |
Martin Weale, director of NIESR, said that he expected the next set of official GDP figures to show "either that the recession is over or that it is close to over". | Martin Weale, director of NIESR, said that he expected the next set of official GDP figures to show "either that the recession is over or that it is close to over". |
But Mr Lambert said he believed it was too soon to be calling the end of the recession. | But Mr Lambert said he believed it was too soon to be calling the end of the recession. |
"Some commentators have been carried away by recent tentative indicators as evidence of 'green shoots'," he said. | "Some commentators have been carried away by recent tentative indicators as evidence of 'green shoots'," he said. |
"It will take some time before we can be sure these shoots have roots we can depend on for sustainable growth." | "It will take some time before we can be sure these shoots have roots we can depend on for sustainable growth." |
Restraint | Restraint |
The CBI expects GDP to fall by 0.1% in the third quarter of 2009 and to be flat in the final three months of the year. | The CBI expects GDP to fall by 0.1% in the third quarter of 2009 and to be flat in the final three months of the year. |
Modest growth, it says, will resume in 2010, with the economy expanding by 0.1% in the first three months and by 0.3% in the second quarter. | Modest growth, it says, will resume in 2010, with the economy expanding by 0.1% in the first three months and by 0.3% in the second quarter. |
The group predicts that by the end of the recession, the economy will have shrunk by a total of 4.8% - less severe than the 5.9% contraction seen in the early 1980s. | The group predicts that by the end of the recession, the economy will have shrunk by a total of 4.8% - less severe than the 5.9% contraction seen in the early 1980s. |
It expects inflation to fall below the Bank of England's target of 2% in the third quarter of 2009. | It expects inflation to fall below the Bank of England's target of 2% in the third quarter of 2009. |
Although the Bank is currently undertaking a policy of quantitative easing - expanding the amount of money in the system by buying assets, usually government and corporate bonds - the CBI believes the central bank will return monetary policy gradually to "a more normal footing" by the spring of next year. | Although the Bank is currently undertaking a policy of quantitative easing - expanding the amount of money in the system by buying assets, usually government and corporate bonds - the CBI believes the central bank will return monetary policy gradually to "a more normal footing" by the spring of next year. |
At around the same time interest rates will start to edge up, it says. | At around the same time interest rates will start to edge up, it says. |
The CBI also forecasts unemployment to peak at just over three million in the second quarter of next year. | The CBI also forecasts unemployment to peak at just over three million in the second quarter of next year. |
"The restraint shown by businesses and their staff in setting pay awards and accepting short-time working should help to curb the pace of job losses," said Ian McCafferty, the group's chief economic adviser. | "The restraint shown by businesses and their staff in setting pay awards and accepting short-time working should help to curb the pace of job losses," said Ian McCafferty, the group's chief economic adviser. |
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