British banks to see recovery falter: survey

I / London January 11, 2010, 9:55 IST

British banks fear their fragile recovery will grind to a halt over the next few months, according to a survey by employers' organisation the Confederation of British Industry (CBI).

Growth in Britain's financial services industry was lower than expected towards the end of 2009, the quarterly study by CBI and PricewaterhouseCoopers showed.

Banks and building societies warn that an increase in retail and corporate banking lending over the next six months will be choked off by March, leading to cuts in income and profits.

"Firms do not expect growth in business volumes to continue over the coming three months and do not anticipate improving profitability, despite further cost reductions," the CBI said.

Asked how their business volumes fared in the three months to December, 32 per cent of institutions said volumes rose, while 28 percent said they had fallen.

The resulting balance of plus four percent is lower than September's figure of plus seven per cent.      Ian McCafferty, CBI chief economic advisor, said, "The bounce in UK financial services activity over the past six months is not expected to last as we enter 2010.

"Firms see their business volumes falling back again, with no further improvement in profitability over the next three months."