By Max Clarke

Headcount in the financial sector has increased at its fastest level since September 2007, despite an overall reduction in the rate of business growth.

While the figures are still positive, they are less than had been predicted in the joint CBI/ PwC Financial Services Survey.

Business volumes grew, the survey suggests, across all sub-sectors, apart from banking and securities trading, where volumes fell, and insurance broking where business was fairly flat.

“The financial services sector continued to recover over the past three months, but with slower volume growth, following three stronger quarters,” said the CBI’s Chief Economic Adviser, Ian McCafferty. “What is heartening is the unexpected, strong rise in numbers employed in the sector, the fastest since the financial crisis began in 2007.”

The banking sector has declined slightly over the past quarter as costs escalate at their fastest rate, driven in part by banking reforms.

Business slowed most markedly with private individuals, but firms expect business to grow across all of the customer categories, including industrial & commercial companies, financial institutions and overseas customers, over the next three months.

“Concerns about economic recovery and demand have caused a dip in the banks’ confidence while, for the first time in a year, business volumes are dropping off,” commented Andrew Grey, PwC’s Banking Leader It’s been an unsettling quarter, given the release of the Independent Commission on Banking’s interim report and the loss of the Payment Protection Insurance case.”

"Regulatory pressure is still immense and the banks now expect to spend even more than anticipated on compliance over the next year. The fresh wave of cost reduction plans announced recently is a sure sign the banks are keenly aware of the need to improve profitability.

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