City leads way in economic growth race

Optimism throughout financial services sector rose at its fastest rate since the start of the survey in 1989 in the final three months last year

An upsurge in optimism, business and jobs is turning the City into the fastest growing part of the economy it is shown in new survey data released on Monday.

Optimism throughout the financial services sector rose at its fastest rate since the start of the survey in 1989 in the final three months last year. For the fifth quarter in a row profitability was higher and employment is growing at its fastest rate since 2007.

City firms recruited another 10,000 staff in the October-December period and are forecast to add a further 15,000 to the job total in the first quarter this year. That would take employment to 1.16m, only 52,000 below the peak in the Square Mile at the end of 2008 just before the financial crisis began to bite.

The latest insight into the way recovery is feeding into the financial services sector, produced by the CBI and business advisers PwC, shows strong volume growth in all key customer categories with the exception of financial institutions and a notable pick-up in activity with industrial and commercial companies.

There are no signs of a slowdown with the volume of business predicted to grow further in the first quarter and profits set for “robust” improvement. For the first time since the financial crisis all sectors plan to increase capital spending over the next year.

Fee, commission or premium income jumped 36pc in the quarter, the fastest since June 2012. Trading income was up 20pc and while total costs rose 23pc they were almost cancelled out by volume growth.

Banking optimism is continuing to “rise briskly” with business volumes heading for strong first quarter growth. The survey suggests banks are beginning to get a grip on new regulations which are seen as “less of an obstacle” to growth and priorities shifting to retaining customers.

Building societies are feeling more optimistic about the business outlook than at any time during the past seven years after a lower than expected growth in volumes in the final quarter last year.

Private investors provided a business fillip for finance houses while optimism among life insurers jumped faster than at any time over the past decade. General insurance is enjoying a gradual recovery in confidence and although optimism among insurance brokers has risen moderately business volumes increased at their fastest in four years.

Matthew Fell, CBI director for competitive markets, feels the survey shows “things are starting to look more ‘normal’ after five years of volatility.” He is encouraged by the strength of longer term confidence indicators with marketing spend, employment and investment rising strongly.

Kevin Burrowes, head of PwC’s financial services operations, said regulation is now seen as a lesser obstacle to growth in the banking sector and although compliance remains a major concern “it is slightly less all-consuming than it was.”

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