Slushy thinking as frozen Britain thaws

Short-term gloom and mid-term hesitancy – the 2010 outlook for the financial sector continues to prove uncertain.

This week’s quarterly report on the state of the finance sector from the CBI and PricewaterhouseCoopers has revealed that uncertainty continues to dog the industry, as it struggles with the ongoing effects of recession, widespread mistrust from all sides, and a future 50% super-tax on bonuses.

It’s a near-perfect storm of negativity surrounding HMS Finance, and navigating the ‘good’ ship to a safe port is proving somewhat treacherous. Adding to the foreboding news was a stark warning from the CBI that the “conviction that London’s stature as a financial centre has been damaged by the crisis seems to be growing.” Sticking with the nautical theme, a growing swell capable of damaging the capital’s financial standing may be about to appear off the port bow. It’s no wonder, judging by some of the CBI/PwC analysis.

The UK banking sector may have been saved by an injection of government aid larger than the 2008 Gross Domestic Product of countries including New Zealand, Pakistan, and Israel, but confidence in the division remains “less than encouraging” in the short term. Building Societies are enjoying increased levels of confidence, but even here there’s no sign of a recovery in customer demand.  The survey results even suggest profitability for the mutualised institutions isn’t expected to increase any time soon.

As for the insurance markets, the survey reported that both general and life insurance sectors are desperately looking to reduce operational costs and head counts. This despite an increase in demand for general insurance, and increased levels of confidence amongst lifers. I mean, shouldn’t there be an insurance policy for this sort of thing?

Cost-cutting isn’t on the agenda for investment managers however…well, apparently. Perhaps such threats are now “Soooooo twenty-oh-nine,” that I’m wondering whether the sector made job retention a New Year’s resolution.