Activity across the UK financial services sector
grew for the second quarter in a row, for the three months to 31
December, according to the latest quarterly
CBI/PricewaterhouseCoopers (PwC) Financial Services Survey.

But employment in the UK financial services
sector fell at its fastest rate since the last recession in March
1993.

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Andrew Gray, UK banking leader at PwC, claimed
despite subdued business levels, the banks are more confident than
they have been at any point since 2005 in anticipation of stronger
commercial demand.

He said: “On the retail side, while banks are in good shape and
are able to lend more, actual demand is still faltering.”

Gray added that employee numbers at retail
banks would continue to fall as banks take measures to be more cost
effective.

The report found that even when the industry
returns to stable conditions, employee numbers would not return to
pre-recession levels as banks will have introduced more
technology-led banking services that require less staff and are
more cost effective.

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Key findings for the whole UK banking sector
were:

  • Income from fees, net interest, commissions, investments,
    trading and premiums fell
  • Trading income is expected to decline further in the next
    quarter
  • Income from fees, premiums and commissions is expected to be
    stable in the next quarter
  • Big decline in the value of non-performing loans – the biggest
    fall since December 1996
  • Banks plan to spend more on marketing
  • 96% of respondents find cross-selling to existing customers
    will drive organic growth throughout 2011
  • No focus on M&A transactions
  • 33% said forming strategic partnerships and alliances will
    drive organic growth