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.”

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook

UK jobless falling faster than thought, to hit target early - Reuters poll

British unemployment is falling faster than previously thought and will reach the Bank of England's 7 percent threshold for considering a rate hike well before the central bank envisages, a Reuters poll found.

The poll of 50 economists, taken this week, suggests it will fall steadily in the coming quarters and reach 7 percent early next year. A December poll had pointed to this happening in the second quarter of 2015 and a November poll even later.

"Recent sharp falls in unemployment will probably continue over the next few months. It will still take a year or so to reach 7 percent but growth in the workforce should remain strong," said Samuel Tombs at Capital Economics.

The BoE has pledged not to discuss hiking interest rates from their record low of 0.5 percent until the goal is met.

Britain's economic recovery picked up pace last year and some economists say the Bank will lower its target and hold borrowing costs low until the country's turnaround broadens out.

The bank's actions will also be closely watched by the country's politicians, who are beginning to gear up for an election in May 2015 which could hinge on the economy.

Thirteen of 35 economists in the poll expect a lowering of the threshold, probably to 6.5 percent, a similar proportion to that in a Reuters poll taken earlier this month ahead of the Bank's January policy meeting when it left policy unchanged.

"The BoE needs to review whether the 7 percent unemployment threshold is appropriate for the use of forward guidance, especially as the unemployment rate is quickly approaching 7 percent," said Azad Zangana at Schroders.

"Hitting the threshold will give the impression that the BoE will then consider raising interest rates, which we think it has no intention of doing in the near term."

Some pressure on the Bank has eased - data on Tuesday showed inflation had fallen to its 2.0 percent target for the first time in four years during December, but may nudge up again as utility and transport price rises are factored in.

With growth picking up and unemployment falling, economists are now narrowly predicting a rate hike in the second quarter of 2015, albeit one of only 25 basis points. The is the first time in nearly two years that the Reuters poll has signalled a tightening of monetary policy.

Britain's economy is still 2 percent smaller than before the financial crisis began but its growth rate is far outstripping the neighbouring euro zone, its main trading partner.

The economy is expected to grow 0.6 percent per quarter through to the middle of next year, the end of the forecast horizon and the highest forecasts to date, compared to just 0.2-0.4 percent in the common currency bloc.

Recovery in the now 18-member union remains fragile, with unemployment running at a record high and an increasing threat of deflation.

"There are still significant risks from any renewed flare-up in the euro zone crisis," said John Hawksworth, chief UK economist at PwC.

Azure Global’s vision is to be widely recognized as a reputed firm of financial business advisors, achieving real growth for ambitious companies and to become the first choice for F&A outsourcing for accountancy practices and businesses alike for more info visit our site Azure Global and join us also On Facebook