Five Signs the Banking Sector is Already Having a Good Year

1. The labour market has always been one of the best indicators of economic health and ours is getting better and better according to the Bank of England’s Inflation Report for February. Unemployment has fallen since November and employment growth is expected to return to above-average by the end of the quarter. Employment opportunities in today’s market are showing higher than pre-recession and a historic high level of vacancies suggests any drop off in labour demand growth should be short lived.
2. “Credit conditions for large and medium sized businesses are continuing to improve”, according to Ian Stewart, chief economist at Deloitte, responding to the latest Bank of England Credit Conditions Survey. He added that “this is consistent with our latest survey of chief financial officers, who start 2015 with risk appetite above the long-term average and predicting a strong year for business investment. After declining for more than five years, 2015 is likely to be the year in which corporate borrowing finally starts to recover.” It may seem like the small firm sector is a “weak spot” here, but it could just be because profitability is up – the 2014 Q3 SME Finance Monitor report says that three quarters of small and medium companies did not “want or need” to access bank credit.
3. Staying with SMEs, research by npower published last month revealed that three in five small and medium companies in London “expect to see an increase in business turnover” in 2015. 60% of those surveyed expect wages to rise for full time employees with one in six saying “wages will outstrip inflation”. All of which paints a picture of a city feeling more assured about the future than it has in a long time, and as Jason Scagell, director of npower Business, said when releasing the figures: “London is widely seen as the powerhouse and bellwether of the wider UK economy, so the confidence shown by SMEs in the capital is encouraging for the country as a whole.”
4. Figures released by the Finance & Leasing Association (FLA) at the start of the month showed 13% growth in asset finance new business during 2014 to £25.4 billion, the largest annual rate of growth since the financial crisis began. Geraldine Kilkelly, FLA’s Head of Research and Chief Economist, said: “The figures show a strong recovery in the asset finance market in 2014. Businesses were keen to use leasing and hire purchase to invest in a wide range of assets, with particularly strong growth in new finance for production plant, agricultural equipment and construction equipment. The core market of deals of up to £20 million wrote new business of £24.6 billion in 2014, and is on target to surpass its pre-crisis peak in 2015.” In December alone, business equipment finance grew by 6%, IT equipment finance by 10% and plant and machinery finance by a huge 48%.
5. This morning, just as I was putting this list together, the Confederation of British Industries upgraded its growth prediction for the UK economy in 2015 to 2.7%, up from the 2.5% they predicted in November. Katja Hall, CBI Deputy Director-General, said ” falling unemployment coupled with improving wage growth and rock bottom inflation should mean that people see more money in their pockets” with Rain Newton-Smith, CBI Director for Economics, adding “The UK is in good shape compared with other economies, with both investment and household spending underpinning economic growth.” The revised prediction also takes into account the high probability that the MPC won’t raise interest rates until early 2016, helping to support growth of 2.6% next year.

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