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Monday, October 5, 1998 Published at 11:49 GMT 12:49 UK

Business: The Economy

Services next for slowdown

The financial services sector is suffering from a lack of confidence

The economic slowdown is spreading to the financial services sector, according to a new report which says business confidence is at an eight-year low.

[ image: The CBI survey paints a gloomy picture]
The CBI survey paints a gloomy picture
The Confederation of British Industry found that 62% of financial services companies were less optimistic than three months ago, with only 9% reporting a more optimistic outlook.

All sectors of the financial services market reported a drop in confidence, except for general insurers, who sell non-life products such as property and liability cover.

Companies are bracing themselves for a sharp slowdown in the volume of business.

Just 30% of respondents expect a rise over the next three months, while 21% anticipate a fall.

Storm clouds gather

Sudhir Junankar, the CBI's associate director of economic analysis said: "The economic storm clouds around the world are starting to cast a shadow over prospects in the financial services sector, even though growth so far has been fairly robust.

"Business confidence fell almost across the board and volume growth is set to slow sharply in the run up to Christmas.

"Business prospects for the year ahead have also deteriorated with companies more concerned about the strength of demand than at any time over the past two years."

Angus Hislop, senior banking partner at PricewaterhouseCoopers, added: "The banks' lurch to pessimism reflects the general market mood."

However, he went on to say that there is little evidence pointing to a significant slowdown from specific indicators.

He said: "Over the coming three months profitability and fee income show good growth, although overall business volumes seem set to level off".

Overall profitability grew at the slowest rate for more than two years.

It is set to stay broadly flat over the next three months, the weakest expectation since March 1995.

Service suffering

A survey by the Chartered Institute of Purchasing and Supply also showed a further decline in the services sector.

It found business activity fell to 54 index points in September, from 54.3 points in August.

This was the sixth successive monthly fall and the lowest index score since the survey began two years ago.

Andrew Milligan, analyst at CGU Asset Management, said: "Today's survey supports the central view that the lagged impact of monetary tightening plus a strong pound and the slowdown in emerging markets are cumulatively curbing service sector expansion."

The CIPS survey also found a marked decline in business expectations.

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