Financial services firms have seen business fall at the fastest pace for nearly a decade, a study has showed.

The financial services sector saw business volumes in the three months to the end of November fall at the fastest rate for nine years, said the CBI's quarterly survey.

It showed that 42 per cent of companies said business volumes fell during the period while 34 per cent saw a rise.

The balance of minus eight per cent, calculated by subtracting those reporting a fall from those reporting a rise, is the worst since December 1992.

But firms expected a modest bounce back over the next three months, with a balance of plus five per cent expecting volumes to increase.

However, the fall in global demand had caused the biggest fall in profitability since March 1991 and as a result firms were cutting jobs and investment.

In addition, the pace of job cuts was set to increase over the next three months.

Securities traders, fund managers and life insurance have been the hardest hit by the fall in business, the CBI said.

Ian McCafferty, CBI chief economic adviser, said: "These worrying findings show the normally resilient financial services sector counting the cost of the global slow-down.

"Firms are seeing profit margins squeezed and they are responding by seeking ways to reduce their cost base.

"Encouragingly, there are signs of a modest recovery over the next three months.

"Confidence remains weak but it has not got any worse following the steep decline reported in September. Nevertheless, conditions will remain difficult for the foreseeable future."

The CBI survey covers banks, building societies, securities traders and fund managers.