Financial services rebound at fastest rate in 3 decades

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 (Confederation of British 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 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.”
In a sign that financial services’ disintegrating jobs market has 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 assent 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.”
Meanwhile, there has been a hitch in the UK’s manufacturing sector. Costs have risen at the fastest pace in three and a half years, new data has indicated, as the energy price shock from the Iran war has hit businesses.
S&P Global research has found that manufacturers suffered the highest increase in input prices since late 2022 when Russia’s invasion of Ukraine sent gas prices spiralling. Survey data also showed that the rise in input inflation was the steepest since the sterling crisis in 1992.
Manufacturers told researchers that changes in oil and gas prices, which have risen by over 70 per cent since the war started, could also dampen demand among buyers over the coming months. Output had already suffered from a decline as momentum enjoyed in previous months “hit the buffers”, economists have said.
Head of industrials at the accountancy RSM, Mike Thornton, said: “Demand is being squeezed. New orders have ticked down, leaving the sector feeling pinched. The increase in energy costs will be a persistent headwind, but worries relating to supply chain disruption are growing.”

Andy Jalil The writer is our foreign correspondent based in the UK.