Optimism for UK financial services has fallen at its fastest pace since the finance crisis of 2008, according to the latest quarterly CBI/PWC survey.
According to the survey of 84 firms, 10 per cent of firms were more optimistic about the overall business situation compared with three months ago, whilst 53 per cent were less optimistic, giving a balance of -43 per cent, compared with -24 per cent in previous quarter.
Sentiment has fallen consistently over the past 12 quarters, with the exception of the first three months of 2017 when it was flat.
Business volumes also fell for a second consecutive quarter, the fastest pace recorded since September 2012.
Looking ahead to the quarter to June, business volumes are expected to fall further, with the weakest expectations since September 2008 (-31 per cent): 16 per cent of firms expect volumes to rise next quarter, and 46 per cent expect them to fall, giving a balance of -30 per cent.
The survey claimed the greatest drag on growth in the financial services sector was from investment management, where volumes fell at the fastest pace since the end of 2008.
Meanwhile, employment across the financial services sector has also suffered, falling at its fastest in four years. About 17 per cent of financial services firms stated they had increased employment, while 38 per cent said that headcount fell, giving a balance of -21 per cent.
The survey found this was driven predominantly by a sharp decline in headcount in the banking sector. Employment growth is set to pick up next quarter, however.
Overall profits growth, however, picked up in the three months to March, with 47 per cent of firms reporting that profits had increased and just 26 per cent saying they fell.
Rain Newton-Smith, chief economist at the CBI, said: "The alarm bells ringing at the state of optimism in the financial services sector have now reached a deafening level.
"Not only has it plummeted at the fastest rate since the depths of the financial crisis, it has been falling or flat since the EU referendum. Additionally, business volumes and employment have fallen over the last quarter.
"Brexit is now a national emergency. No-deal has to be clearly ruled out, then MPs must finally compromise and deliver a solution that protects jobs, livelihoods and communities across the UK.
"It is in absolutely nobody’s interest for the uncertainty to drag on, and continually chip away at our economy and financial services sector."
Andrew Kail, head of financial services at PwC, added: "Optimism has declined at the fastest rate since 2008. This is obviously cause for concern, but the wider business story the industry is telling is one of resilience - a powerful endorsement from an industry which remains a cornerstone of the UK economy.
"Three strong themes stand out in the survey: Brexit, people, and future investment. Despite the continuing uncertainty, these businesses are embracing disruption and reinventing themselves to be ready for growth in a post-Brexit environment including developing leaner, more specialised workforces.