By Daniel Hunter

Britain's financial services businesses are growing at the fastest pace since 2007, according to new figures from the CBI.

The survey conducted by the CBI and PwC, showed that profits rebounded and hiring was on the up in the three months to September.

Business volumes grew at their fastest rate since 2007 and the pace is expected to continue into the coming quarter.

Sixty percent of businesses surveyed said volumes were up during the period, compared to just 11% who reported declines. And a further 63% said they expect volumes to increase next quarter.

Rain Newton-Smith, CBI Director for Economics, said:

“The UK’s financial services sector is enjoying its strongest run of growth since 2007, with activity rising across all customer categories and profitability bouncing back.

“The spike in costs was off-set by a steep fall in the value of non-performing loans, suggesting that much of the fall-out from the financial crisis is now working its way out of the system.

“With competition one of the top concerns for the coming year, the sector could be moving to a new phase in the recovery where firms are feeling more assured about the level of demand, and are now shifting their gaze to competing for new customers and business. This is reflected in their expectation that sales to new customers will be the main driver of growth in the coming quarter.

“Worries about the impact of legislation at home and from Europe, such as new capital requirements and the prospect of a financial transaction tax, are also increasingly weighing on the sector.

“However, with strong broad-based growth, financial services firms are relatively upbeat about future prospects, despite some big geo-political risks that remain on the horizon.”

Kevin Burrowes, UK financial services leader at PwC, said:

“The 100th CBI/PwC Financial Services Survey paints a picture of improving confidence and profitability. There is an increasing focus on new services and technology-enabled growth. Time will tell if established banks are underestimating their need for digital capabilities as we see a continued influx of new entrants without the chains of legacy systems, meaning that tougher competition is an increasing concern. There are hints of a new ‘war for talent’ and tighter monetary policy in 2015 could also pose a challenge.”

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