Financial services (FS) firms reported slower volumes of business growth in Q1, according to new research by the Confederation of British Industry (CBI).

This comes as optimism in the FS sector fell again, though at a more gradual pace than in Q4 2024.

The CBI’s latest quarterly survey showed that FS firms anticipate volumes to grow at a quicker pace next quarter. However, investment and hiring intentions were negative, with firms also expecting profits to continue falling over the next three months.

According to the CBI’s findings, optimism across the FS sector continued to fall in March, but at a slower pace than in the previous quarter (weighted balance of -8% from -28% in December).

Business volumes growth also eased in Q1 (+5%) after a considerable rate of expansion in the three months to December (+32%). The CBI said that firms are expecting volumes growth to accelerate again in Q2 (+29%).

Profitability also fell at a modest pace in Q1 (-9% from -14% in December), and the CBI found that FS firms expect a broadly similar rate of decline in profitability over the next three months (-8%).

CBI chief economist, Louise Hellem, said: “The FS sector had a weak start to 2025, with firms reporting only slight growth in business volumes and optimism falling for a third consecutive quarter.

“Profitability was squeezed again, amid a continued decline in average spreads. These challenging business conditions led to negative investment intentions, with FS firms expecting to reduce capital spending on IT for the first time since 2010.

“With global trade tensions posing significant challenges for UK businesses and financial markets, as well as domestic changes from NIC hikes to minimum wage increases – FS firms, alongside other sectors, are facing an uncertain future with the added weights of higher costs and a weaker global economic outlook.”

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