UK finance sector IT spending to remain flat - survey
28 June 2010 | 7818 views | 0
Spending on IT by UK financial services firms is set to remain flat over the next year, while employment in the sector could be set for a modest rise, according to a survey from the CBI and PwC which also reveals industry growth in the last quarter has been lower than expected.
According to the survey of 73 market participants, activity in UK financial services grew in the last three months at the fastest rate since September 2007 but was still much lower than expected and well below "normal". Profitability rose for the fourth consecutive quarter, but respondents expect this to level off during the next three months.
Firms' investment plans for information technology are broadly flat for the next 12 months, with a balance of plus three expecting to authorise more capital expenditure, down from a +25 balance in March.
For banking, the balance is zero, compared to +39 three months ago, while building societies show a plus six balance, life insurance -83, general insurance +65, insurance brokers plus four and securities trading -66.
Meanwhile, the numbers employed in the sector continued to fall during the last three months but only modestly - a balance of minus six per cent - and slightly slower than expected. Firms now expect staff numbers to increase next quarter and, if this materialises, it will be the first increase since December 2007.
The survey also shows that concern about the impact of regulation and legislation on future business remains high. The number of firms saying they are concerned about the impact of statutory legislation on their ability to expand in the next 12 months remains high at 62%, following the previous quarter's record 74% level of concern.
Andrew Gray, UK financial services consulting leader, PwC, says: "The generally upbeat outlook for banks of growing revenues and profitability is currently being overshadowed by the looming threat of regulation on the sector. While banks may be confident in their own business models, they are unsettled by their operating environment; where regulatory shake-up, levels of future demand, competition from new entrants and political intervention are weighing heavily on their minds."
In addition, the percentage of firms believing there is a high likelihood of further deterioration in financial markets has risen to 23%, the highest proportion since the first quarter of 2009.
John Cridland, deputy director-general, CBI, says: "This survey was conducted when financial markets were feeling the intense strain from fears over euro area sovereign debt and, for the first time in over a year, a notable minority of firms were worried that the risk of further market deterioration is high."