Confidence falls in insurance, banking and finance sectors

In June 2010, confidence in the sector was +32.0 - at 16.6 points it is now much closer to the UK average of +13.7 points recorded in the last quarter.

Commenting on the findings, Peter Allen, head of financial services at Grant Thornton, said: "While it appears business concerns are now largely starting to ease and many firms across other business sectors are becoming more optimistic about their prospects for the future, confidence in the banking, finance and insurance sector has continuously weakened in the last 18 months after the boost seen at the end of 2009.

The pressures of greater regulation, such as under the Project Merlin agreement, partly explain the continuous lowering of business sentiment. The business secretary has also in recent days warned of further government action as it has been reported that many banks have failed to meet the targets under this agreement. This increased scrutiny is likely to continue to mute optimism in the sector during the second half of this year."

The industry expects the growth rate in turnover to continue to improve in the coming year, with repondents predicting a 5.7% expansion compared to the 4.4% increase seen in the last 12 months. Gross profits growth expectations have however been reigned in and now stand at 5.9% compared to the 7.9% increase seen in the last 12 months.

Mr Allen continued: The industry is continuing to perform above the national average but growth is weakening and other sectors have closed the gap, having seen the strongest growth since pre-recession in the last quarter. The Eurozone crisis will continue to send nervous jitters through the market, impacting on activity going forward. Inflationary pressures are also likely to continue in the next quarter, suppressing any real growth."