Difficult quarter for the financial sector

The ongoing credit crunch has meant that the financial services sector has endured another difficult quarter, according to the CBI.

The latest Financial Services Survey from the CBI and PricewaterhouseCoopers LLP reveals that business volumes continued to fall at a sharp pace whilst both the numbers employed in the industry and profitability fell at their fastest rates in five years.

The survey also found that many firms expect to find it significantly more expensive to access finance for investment purposes, and that they fear the credit squeeze will get worse over the coming six months.

In fact, just 17% of respondents said volumes had grown in the three months to early March, while 47% said they had decreased. The resulting balance of -30%, followed December's near 17-year low of -33%, was worse than expected.

Commenting on the figures, CBI Chief Economic Adviser Ian McCafferty, said it was clear that the credit crunch has worsened over the first three months of this year.

The interbank markets have become more gummed up, with banks even more unwilling to lend, and credit spreads have widened

We can expect further tough times in the financial sector, and as this feeds through into the wider economy it will inevitably be felt through slower economic growth this year and next, he added.