CBI/PwC survey “one of the gloomiest ever”

The 73rd CBI/PwC quarterly financial services survey showed an industry-wide fall in optimism across sectors

LONDON – Optimism is almost at an all-time low across all sectors of the financial services industry, according to a new quarterly survey released by financial advisory firm PricewaterhouseCoopers (PwC) and the Confederation of British Industry (CBI).

As the credit squeeze continued, income values fell sharply while costs continued to rise. Most respondents agreed that the fallout from the credit crunch would continue for up to six months, while others believe it could continue for at least another six months. That said, employment and investment, particularly in IT, are rising, indicating that although the short-term outlook is bleak, the long-term outlook is broadly positive.

Participants were polled between November 22 and December 5 2007, so the survey provides a snapshot of the financial services industry at its lowest point before the three-month Libor levels rebounded and the Bank of England cut interest rates.

For the first time in a while, financial services firms are less worried about regulation and are more occupied with raising funds. That said, insurers are beginning to consider and budget for the advent of Solvency II, which has led to an increase in expenditure despite falling profits in the insurance sector. “2008 is the first year that insurers are starting to spend for regulation,” said Clare Thompson, head of PwC’s risk advisory services group.