UK financial service companies are more optimistic than at any time in the last two years, although banks remain downbeat, the Confederation of British Industry and accountants PricewaterhouseCoopers said today.

Looking ahead to the next three months, firms are the most upbeat since March 2007 on business volumes with 29 per cent expecting a rise and 18 per cent anticipating a drop, giving a balance of +11 per cent, the report said. The views of wealth managers were not explicitly distinguished in the report's findings.

Profitability continued to fall in this quarter, however, but at a much slower rate. Some 27 per cent of respondents saw profits rise, while 51 per cent saw a fall, giving a rounded balance of -23 per cent (compared to -47 per cent in March). This rate of decline is expected to ease further in the next quarter to -17 per cent.

Business sentiment recorded its first rise in two years with a balance of 13 per cent of firms more optimistic about the overall business situation in the financial services sector than in March (-34 per cent).

Many parts of the UK’s financial services sector expect business volumes to rise in the next quarter after 21 months of falls, while optimism about the overall business situation has risen for the first time in two years. But banking remains under pressure, the report said.