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U.k. Financial Firms Plan To Eliminate 13,000 Jobs In 3rd Quarter

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U.K. Financial Firms Plan to Eliminate 13,000 Jobs, CBI Says

June 29 (Bloomberg) -- U.K. financial services companies may cut 13,000 jobs in the third quarter even as they expressed rising optimism for the first time in two years, Britain’s biggest business lobby group said.

“Conditions still remain rough but there are signs of some improvement expected in the coming months,†according to Ian McCafferty, the Confederation of British Industry’s chief economic adviser at a press conference in London. Profits, employment and investment remain “on a downward trend,†he said.

The rate of job cuts is slowing, the group’s quarterly financial services survey showed. Financial services companies cut about 17,000 jobs in the first quarter and probably shed 15,000 in the second quarter, said the CBI.

The Bank of England last week said financial institutions remain vulnerable to further shocks. British banks told the survey that revenue declined in the second quarter at the fastest rate since March 1991. Lenders are less optimistic “about the overall business situation†than when they were surveyed in the first quarter, the survey said.

“The rising level of bad debts are a further worry for the industry,†said McCafferty.

Concerns about bank funding were the highest since the survey was introduced in 1989, the CBI said.

“Wholesale funding is still very tight,†said John Hitchins, U.K. banking leader of PricewaterhouseCoopers LLC, which conducted the survey with the CBI. There is “intense competition†for retail deposits, he added.

Insurer Optimism

For the financial services industry as a whole, revenue is expected to rise for the first time next quarter following seven quarters of declines, the CBI said.

Insurance companies are the most optimistic about growth in the three months starting July 1, while customer-owned lenders, known as building societies, anticipate revenue and profitability will “stabilizeâ€. Securities traders and investment managers expect an improvement in their business to be “short-lived,†said the CBI.

The CBI surveyed 73 financial-services companies, including banks, building societies, insurers, brokers and fund managers from May 20 to June 3. The CBI represents about 240,000 companies that employ one-third of Britain’s private sector workforce.

To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net

Last Updated: June 28, 2009 19:01 EDT


More brown shoots.

Edited by MOP

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There are signs that the financial services sector is emerging from the worst of the downturn, a quarterly survey from the CBI suggests.

The UK's finance services sector could be on a "gradual" road to recovery, said the survey by the business group.

Incomes and profitability fell in the three months to June, but at a lower rate and business volumes are tipped to rise in the next quarter, said the CBI.

But the group warned of "significant job losses" ahead and investment cuts.

And the business group said conditions for banks remained tough, with rising debt levels a further concern for the industry.

'Lower profitability'

Finance sector firms saw lower business volumes in the quarter to June, but it was not as bad as that seen in the three months before.

Of those surveyed some 22% saw business volumes climb in the period to June, and 50% saw business volumes drop.

The balance of 28% seeing contraction was less than the 47% seeing a fall in the quarter to March.

"Having seen business volumes tumble continuously for 21 months, some parts of the financial services sector look like they may be starting to come through the worst," said CBI chief economist Ian McCafferty.

However, he added: "We can still expect lower profitability, significant job losses and cuts to investment in the coming months".

On the upside, firms were more positive regarding the next three months about business volumes than they have been since March 2007 as 29% of firms predict an increase, while 18% foresee a fall.

'Worst may be over'

And a balance of 13% of firms were more upbeat regarding the general business outlook than in the previous quarter - marking the first rise in two years.

The UK economy is stabilising but it will not be until early next year that a "slow and gradual" recovery will begin, business leaders have said.

The economy will contract by 3.9% over 2009 before seeing a return to growth of 0.7% next year, the CBI predicted.

"The harshest period of the recession looks to be behind us," said CBI director general Richard Lambert.

But he warned people against getting carried away by talk of "green shoots" in the economy.

In the Budget, the chancellor forecast the economy would shrink by 3.5% this year before expanding by 1.25% in 2010.

Of the CBI's less optimistic forecast, Mr Lambert said: "The return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behaviour.

"For positive growth to return, lenders need to feel more confident so that credit can start flowing again."

Dressed as green here.

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