Banks gloomy on credit crunch prospects

1 July 2008

The credit crunch seems set to continue for the near future, a new UK banking survey has shown.

Accountants PricewaterhouseCoopers (PwC) and the Confederation of British Industry (CBI) found that a majority of banks think that it will be more than half a year before the financial crisis is over.

Commenting on the finding, Ian McCafferty at the CBI said: "Conditions look set to remain difficult for some time yet…the interbank lending system is still looking gummed up, and spreads have widened more than at any time in the past eighteen years.

"Profitability in the sector is being badly hit, so firms are trying hard to trim costs by planning to cut back on training and marketing for the first time in a number of years. The problems of the financial sector will echo throughout the wider economy and will drag economic growth down this year and next."

PwC's John Hitchins added: "Banks have made their gloomiest profitability prediction since 1994 and sentiment in the sector has fallen the most sharply since 1998. Volumes of business are declining faster than expected and economic worries are broadening from the retail arena to include the commercial sector."

A total of 87 financial firms were polled over the course of the research.

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development