Good news at last? Financial services sector rebounds at fastest rate this century
Britain’s financial services sector rebounded in the first three months of this year powered by the fastest single-quarter recovery since 1996, a closely watched survey found.
According to the CBI’s industry-wide survey, sentiment among financial firms improved for the first time in nearly two years, as an uptick in profitability was aided by the uncertainty surrounding last autumn’s calamitous Budget period moving further into the rear-view mirror.
Bosses had reported a “rapid” fall in business activity at the industry body’s previous survey as an uncertain policy outlook weighed on firms’ profitability and investment intentions. Its weighted balance for business volumes dropped to -36 per cent in the final quarter, but rebounded to a score of +65 per cent over the start of 2026.
The shift in fortunes represents the fastest recovery in business volumes recorded by the CBI this century. Firms also expect business activity to continue to improve in the next three months, albeit at a slower pace.
Alpesh Paleja, the industry body’s deputy chief economist, attributed the recovery to a rebound in sentiment, but warned that the ill effects of the war in the Middle East could knock the industry’s recovery off course.
“The sector still appears to be digesting the implications of conflict in the Middle East,” he said.
“This is not surprising given that financial services firms are at the epicentre of volatile market moves, and that the economic impact of the conflict is still crystallising. ”
Financial services jobs market to pick up
In a sign that financial services’ disintegrating jobs market had bottomed out, bosses said headcount had stayed flat at the start of the year, but expected it to rise marginally over the coming quarter.
Three years of restrictive monetary policy and the ascent of artificial intelligence have combined to spark a stark deceleration in the financial sector’s labour market. Last September, it emerged Lloyds had told 3,000 staff their roles were at risk of redundancy, and in January, embattled lender Metro Bank was forced to launch its third wave of job cuts in as many years.
Firms’ investment intentions remain mixed, however, with most respondents citing an uncertain demand outlook as a reason why they felt reluctant to plough more cash into their staff or wider operations. Respondents said the increased cost of doing business was throttling their willingness to invest.
Paleja urged ministers to speed up their flagship deregulation drive to encourage more investment.
He said: “Navigating through these uncertain times will require the government to double down on delivering the Financial Services Growth and Competitiveness Strategy.
“Priorities must include continuing to work with the FCA [Financial Conduct Authority] and PRA [Prudential Regulation Authority] to streamline unnecessary regulatory burdens, accelerating delivery of the Mansion House reforms, and deploying capital at scale through catalytic finance programmes –including the British Business Bank.”