Financial services companies are bracing for a sharp surge in redundancies over the coming months as investment strategies and confidence plummet to record lows.
Sector activity declined at its steepest pace since December 2023 during the three months to June, the Confederation of British Industry (CBI) revealed, as reported by .
This represented the first contraction in sector activity for over a year.
A dramatic fall in banking output drove the downturn as companies predicted sluggish performance in the months ahead.
Employment across financial services dropped, with firms anticipating an escalation in job cuts.
City AM had previously highlighted that British banks were cutting staff at their fastest rate since 2018.
Overall workforce numbers at º£½ÇÊÓƵ lenders plummeted 5.25 per cent to 580,371, reaching a decade-low figure, The Banker's data showed.
Standard Chartered and HSBC led the largest redundancy programmes, eliminating 4.5 per cent and 4.3 per cent of their respective workforces.
However, the troubles are now anticipated to spread throughout the broader financial services industry as companies grapple with deteriorating economic circumstances.
Mansion House speech is a lifeline
Alpesh Paleja, the CBI's deputy chief economist, noted that "conditions deteriorated" throughout the sector.
Paleja indicated that activity is "projected to stabilise next quarter" whilst firms continue to anticipate workforce reductions and investment cuts. He stated: "Firms facing continued economic uncertainty now will be looking ahead to the Chancellor's Mansion House speech and to the autumn budget for reassurances, particularly that the burden of potential tax rises doesn't fall squarely on their shoulders."
The banking sector has been anticipating the Mansion House speech for a series of reforms designed to enhance the industry's global competitiveness.
In a piece for City AM, David Postings, chief executive of banking trade body º£½ÇÊÓƵ Finance, described the Mansion House speech as providing Chancellor Rachel Reeves with "a golden opportunity to move from growth ambition to action."
Changes to the ring-fencing framework and Financial Ombudsman Service (FOS) have been identified as key areas where the Chancellor could strengthen the banking industry.
City AM disclosed on Monday that the Big Six lenders – Barclays, Natwest, Nationwide, HSBC, Lloyds, Santander – contributed £38.8m in administrative fees to the FOS for the year ending March 31.
