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Spending curtailed

Financial services facing sharp cuts in investment

Financial services

Office work is facing severe cutbacks (pic: Terry Murden)

Financial services companies expect to cut back on jobs expansion and impose heavy cuts to investment plans over the next year as they respond to the effects of the covid-19 pandemic.

Headcount growth could be trimmed by nearly 40% while spending will switch from land, buildings, plant, machinery and marketing to IT and training, according to the latest CBI / PwC survey.

Rain Newton-Smith, CBI chief economist, said optimism fell in the three months to March, and firms expect a sharp decline in business ahead.

“The bulk of the survey took place before social distancing measures were ramped up, but there were already signs of the Covid-19 pandemic leaving its mark.

“Expectations for business volumes and headcount weakened, non-performing loans rose sharply, and financial firms are planning heavy cuts to investment in the year ahead.”

Employment fell 9% in the last quarter at the fastest pace in a year, driven by the banking sector. Headcount growth is set to decline at a much faster pace next quarter (-37%), the weakest since March 2009.

Marketing spend is set to be cut back by 32%, to the greatest degree since June 2009. Investment intentions also deteriorated for other areas.

IT spending is expected to increase by a fifth (20%), but to the least extent since 2012, while spending on land & buildings will fall by half and vehicles, plant and machinery by 28%).

Andrew Kail, head of financial services at PwC, said: “The Covid-19 pandemic is one of  the most significant tests of operational resilience the FS sector has seen.”

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