Business activity across the UK's financial services sector saw its sharpest drop since the start of the COVID-19 pandemic in the third quarter of 2025, according to the latest Confederation of British Industry (CBI) survey.

Despite the severe slump in activity, overall business sentiment was stable for the three months ending in September, a marked improvement from the steep pessimism recorded in the previous quarter. Crucially, financial services firms are now forecasting a strong rebound in business volumes for the next quarter, signalling a potential turning point.

The survey, which ran from late August to mid-September, also found that firms anticipate a slower rate of job losses and have slightly more positive plans for future investment, though concerns over uncertain future customer demand are widespread.

Key Survey Insights

Business Volumes: The amount of business conducted fell at the fastest rate since June 2020. However, companies expect a robust recovery in the final quarter of the year.

Profitability: Profits continued to fall but at a slower pace than the previous quarter. Firms are optimistic, predicting a fast rise in profitability next quarter.

Pricing Power (Spreads): Average spreads (the difference between a financial institution’s lending and borrowing rates, often reflecting profitability on transactions) saw a fast decline but are expected to fall at a less severe rate next quarter.

Bad Loans: The value of non-performing loans (loans where the borrower is not making payments) was stable and is expected to remain unchanged.

Workforce: Headcount continued to decline at a solid pace, but the rate of job cuts is expected to slow significantly over the next three months.

Investment Plans: Firms plan to increase their spending on IT over the next twelve months. While investment in property and equipment is expected to fall, the decline is less severe than previously planned.

Investment Limiters: Uncertainty over customer demand was the main factor limiting investment plans, cited by the highest number of firms since September 2012. Concerns over taxation and new regulation were also noted as potential headwinds.

Outlook for the Sector

Louise Hellem, CBI Chief Economist, commented on the findings: "Financial services firms saw the sharpest fall in business volumes since the pandemic during Q3, alongside a fast decline in spreads. However, sentiment steadied in the quarter to September, and firms expect a strong rebound in volumes growth in Q4."

She noted that while investment intentions improved from the last quarter, uncertainty over future demand, cited by the highest share of firms in over a decade, continues to limit capital expenditure plans for the year ahead.

"Whilst challenges remain, there are shoots of potential economic momentum for the financial services sector heading into Q4. Harnessing this momentum will depend on the decisions the government makes during the forthcoming Budget, with the CBI’s message clear: there can be no further tax rises on business. Instead, the government must focus on promoting the strengths of our financial services sector and double down on delivery of the Financial Services Growth and Competitiveness Strategy.”