SCOTLAND'S financial services industry continues to hold its own against market turbulence and widespread fears of a slowdown, according to a new survey.
The Scottish Financial Enterprise (SFE) Quarterly Survey, prepared by SFE and consultants Capgemini, shows that even recent announcements about subprime-related losses by Scottish banks have yet to have the negative impact feared by analysts.
The survey of SFE members, who include 75 per cent of the Scottish industry, finds that the majority of companies remain confident about their prospects during the final quarter of 2007 and into 2008.
According to the survey, most companies (86 per cent) have reported that confidence is stable or increasing going into Q4, while more than half (57 per cent) are optimistic that their business prospects will improve further next year.
In addition, 57 per cent continue to report quarter-on-quarter rises in business levels in the third quarter of 2007. More than half of respondents, or 54 per cent, report steady Q3 profit margins that they expect to continue into the last quarter.
A further 54 per cent of businesses see their business prospects as stable for Q4, while 32 per cent expect an improvement. Gordon Arthur, SFE's interim chief executive, said: "To some extent this positive sentiment is counter-intuitive, but if you think about companies that expect profit margins to improve, remember that our members are mostly big companies who aren't feeling as bad about capital gains tax as smaller players.
"We will have a clearer picture after company results in March are out of the way. But, so far, Scottish companies have fared relatively well in the subprime fallout, and they remain pretty positive.
"Also, people will need to continue contributing to their pensions, slowdown or not, so prospects there are quite encouraging."
Rosemary Stark, Capgemini's vice-president of financial services, said: "The continuing effect of subprime and associated write-downs will be seen across the industry for at least the remainder of 2007, and these are driving the stable, rather than growing Q4 forecasts predicted by the industry.
"However, it is clear from the positive forecasts for 2008 that the Scottish financial services industry believes that market conditions will improve significantly in 2008.
"This positive prediction highlights the resilience of the industry despite the difficult conditions in the latter half of 2007."
The surprise findings are at odds with warnings of impending redundancies, particularly in Edinburgh's financial sector. The Centre for Economics and Business Research (CEBR) said at the weekend that Edinburgh should brace itself for a wave of job losses as financial boards review their budgets and start to trim their staffing costs in response to shrinking confidence. CEBR economist Jonathan Said warned that Edinburgh's finance workers "are a lot more vulnerable" than their counterparts in other sectors, although Scotland would escape lightly compared with the City of London.
Jobs market looking healthy but future remains unclearTHE Scottish financial services job market is experiencing only a mild seasonal dip compared with last year, according to a survey by recruitment specialists Joslin Rowe.
The survey found that job vacancies rose 9.8 per cent in November 2007, with 2,250 job vacancies, compared with 2060 in the same month last year. Margaret Dyer of Joslin Rowe said: "The permanent job markets in Glasgow and Edinburgh certainly look healthier than London. However, we'll have to wait until February to get a clearer indication of how recruitment is likely to be affected by recent market trends. Christmas is always a tricky time for recruitment as the job market seizes up as people sit on their hands and wait for the bonus season or just become embroiled in festivities".
Joslin Rowe also expected Christmas entertainment expenses to take a hit, with 21 per cent of the 620 financial services personnel polled expected to entertain clients or be entertained less than last year. Some 68 per cent expected no change.
The survey also found that the favourite Christmas entertainment was drinks (38 per cent), while opera, ballet, the theatre and concerts attracted 16 per cent. Said Dyer: "The financial services community wants to drown its sorrows and ensure accounts stretch as far as they can".
KEY POINTS• 57 per cent higher business volumes in Q3 2007, with just 18 per cent expecting a reduction in Q4.
• 35 per cent report increased profitability for Q3 2007, while 54 per cent report stable margins
• Asia and the US are the boom areas for Scottish financial business.
• 46 per cent of companies reported rising employee levels, 7 per cent cut staff, while 54 per cent expect stable head count numbers for Q4.
• 93 per cent are "concerned" about the global economy, up by 35 percentage points on Q2
