UK banking sector continues to grow

A survey by the Confederation of British Industry and PricewaterhouseCoopers has confirmed that the UK financial sector continues to improve with profitability increasing for the fifth quarter in a row. However, despite the fact that the growth figure was the fastest quarterly increase since June 2007 it would appear to have fallen short of forecasts from analysts. So what does this mean for the future?

If you drill down into the figures it seems that operating costs have fallen over the last quarter at a time when business has grown. This double whammy has pushed the sector further forward although a number of firms now believe business will start to reduce and job loss will continue into the final quarter of 2010. So despite the short-term performance of the sector being fairly positive it seems that the economic difficulties in the UK will begin to impact towards the end of 2010.

On the horizon there are also various regulatory changes which will come in over the next few years and could result in a significantly increased cost base for UK financial companies. This will impact upon short to medium term growth and could hold the sector back for some time.