Financial services firms’ profits increased in the three months to December in spite of a fall in business volumes, according to a survey conducted by the Confederation of British Industry and PricewaterhouseCoopers.

The survey, which displayed the views of 94 companies, showed that 25% of companies had seen business volumes rise whilst 30% reported a fall over the period.

The resulting balance of -5.0% represented the second consecutive quarterly decline and disappointed expectations of a return to moderate growth.

Some 11% of industrial and commercial companies saw business volumes fall while 21% of financial institutions saw a decline and 9.0% of private individuals saw a fall.

However, 34% of companies stated that they expected growth volumes to resume in the next quarter.

Matthew Fell, Director for competitive Markets at the Confederation of British Industry, said that it was encouraging that firms were more optimistic about their business situation than they were in the previous quarter but warned of the consequences of a likely employee deficit in the market as a whole.

‘There is rising concern that staff shortages are likely to limit business and investment over the next year as well as the challenge of raising finance.’

The number of people employed in the financial services sector fell more sharply than had been expected in the quarter, representing the third consecutive quarterly decline with headcount expected to fall sharply again over the coming quarter.

Kevin Burrowes, UK Financial Services Leader at PricewaterhouseCoopers, commented: ‘Banks are facing a shortage of skills and a growing capital challenge.

‘The UK banking sector is well-capitalised by European standards, but banks now expect the ability to raise finance to be a significant limitation on business during 2013. This implies that their upbeat predictions for growth could be undermined by an inability to commit sufficient capital to lending.’

MF