U.K. Financial Firms Plan to Eliminate 13,000 Jobs, CBI Says

By Jon Menon

June 29 (Bloomberg) -- U.K. financial services companies may cut 13,000 jobs in the third quarter even as they expressed rising optimism for the first time in two years, Britain’s biggest business lobby group said.

“Conditions still remain rough but there are signs of some improvement expected in the coming months,” according to Ian McCafferty, the Confederation of British Industry’s chief economic adviser at a press conference in London. Profits, employment and investment remain “on a downward trend,” he said.

The rate of job cuts is slowing, the group’s quarterly financial services survey showed. Financial services companies cut about 17,000 jobs in the first quarter and probably shed 15,000 in the second quarter, said the CBI.

The Bank of England last week said financial institutions remain vulnerable to further shocks. British banks told the survey that revenue declined in the second quarter at the fastest rate since March 1991. Lenders are less optimistic “about the overall business situation” than when they were surveyed in the first quarter, the survey said.

“The rising level of bad debts are a further worry for the industry,” said McCafferty.

Concerns about bank funding were the highest since the survey was introduced in 1989, the CBI said.

“Wholesale funding is still very tight,” said John Hitchins, U.K. banking leader of PricewaterhouseCoopers LLC, which conducted the survey with the CBI. There is “intense competition” for retail deposits, he added.

Insurer Optimism

For the financial services industry as a whole, revenue is expected to rise for the first time next quarter following seven quarters of declines, the CBI said.

Insurance companies are the most optimistic about growth in the three months starting July 1, while customer-owned lenders, known as building societies, anticipate revenue and profitability will “stabilize”. Securities traders and investment managers expect an improvement in their business to be “short-lived,” said the CBI.

The CBI surveyed 73 financial-services companies, including banks, building societies, insurers, brokers and fund managers from May 20 to June 3. The CBI represents about 240,000 companies that employ one-third of Britain’s private sector workforce.

To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net