Figures from the Office for National Statistics (ONS) released last week indicate that the UK has avoided falling into a triple dip recession as figures show that the economy grew by 0.3% during the first quarter of 2013. The data represents the strongest year on year increase since the end of 2011, as GDP is has risen by 0.6% compared with the first quarter of 2012.
Described by Chancellor George Osborne as “an encouraging sign”, the growth in the economy has been widely received as positive news for the UK. The banking sector on the other hand has endured some significant setbacks over recent weeks.
The Co-op bank pulled out of a major deal to buy more than 600 bank branches from Lloyds TSB last week, a move that was anticipated to bring competition to commercial banking in the UK. In the same week HSBC announced plans to axe more than 3,000 jobs in a bid to cut costs while Santander and Barclays announced their first quarter profits both fell by more than 25%.
Likewise, the Payment Protection Insurance (PPI) scandal was under the spotlight this month as figures from the Financial Conduct Authority (FCA) revealed that pay-outs for mis-sold PPI have now topped £9.3 billion. In addition, earlier this month the regulatory body released complaints data, highlighting the continued customer detriment caused by the scandal. In the second half of 2012 more than 2.1 million PPI complaints were recorded by financial firms, accounting for 63% of all complaints made to financial firms during that period.
Taking into account the number of complaints recorded by the FCA, the Financial Ombudsman Service (FOS) also received 264,375 complaints between April 2011 and April 2012, of which 157,716 were regarding PPI. Notably the FOS overturned 82% of PPI complaints in favour of the customer during the 2011/2012 financial year, reinforcing the argument that banks are erroneously rejecting legitimate complaints, forcing customers to take their complaint to the FOS which ultimately results in a lengthy and frustrating claims process.
While analysts have proposed that the growth in the UK economy will bring consumer confidence and encourage spending, it seems that the practices of UK banks are still leaving customers sceptical. Research by consumer body Which? found that only one in ten consumers trust the banking industry, while nine out of ten believe there should be a compulsory bankers code of conduct, suggesting that the weight of the PPI and Libor scandals are still very much in the minds of UK consumers.
Although the research by Which? indicates that there is still much to do in terms of regaining customer trust in the UK’s financial industry, we should not lose sight of the positive news that the UK has avoided a triple dip recession, bringing optimism to UK consumers that the economy may well be on the road to recovery.
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