UK financial services activity steadied last month after the sharpest fall since the pandemic, according to the CBI financial services survey published overnight.
Business volumes declined with a weighted balance of -36%, down from -24% in June. Despite the deterioration in activity, sentiment was broadly flat, rising to +3 after a sharp fall of -52% in the previous quarter.
Firms expect conditions to improve next quarter, with volumes growth forecast at +37%.
Profitability fell at a slower rate in Q3, at -13% compared with -24% in June, but is expected to rise sharply in Q4 (+26%).
Headcount dropped by -24% but firms see the pace of reduction slowing to -7%.
Louise Hellem, CBI chief economist, said: "Financial services firms saw the sharpest fall in business volumes since the pandemic during Q3, alongside a fast decline in spreads. However, sentiment steadied in the quarter to September".
She acknowledged "shoots of potential economic momentum" for the sector heading into Q4, with firms expecting a "strong rebound in volumes growth".
"While investment intentions improved relative to last quarter, uncertainty over future demand, cited by the highest share of firms in over a decade, continues to weigh on capex plans for the year ahead."
The survey also showed firms plan to increase IT investment over the next 12 months, with uncertainty about demand cited as the biggest factor limiting investment. The share of firms highlighting this rose to 69%, the highest since 2012.