In the banking segment, business volumes rose for the first time since September 2007 during the latest survey period, however growth is not expected to be sustained next quarter due primarily to a fall in business with private individuals.

Ian McCafferty, chief economic adviser of CBI, said: “The bounce in UK financial services activity over the past six months is not expected to last as we enter 2010. Firms see their business volumes falling back again, with no further improvement in profitability over the next three months.

“On a more positive note, financial services firms’ confidence in the general business situation has continued to increase, profitability improved and a much slower reduction in numbers employed was seen in this survey. Job losses are also expected to be minimal in the coming quarter.”

John Hitchins, UK banking leader at PwC, said: “Banks are continuing their run of confidence as business volumes and income levels have grown. However, the sector’s short term outlook is less encouraging. Activity and revenues are expected to decline over the coming quarter, predictions for demand remain weak and an uncertain regulatory future continues to temper the banks growing confidence with caution. On a positive note, the sector reports growing headcount for the first time in two years and average spreads have increased.”

Andrew Kail, UK insurance leader at PwC, said: “The run of confidence insurers have enjoyed for the past five quarters will be more difficult to sustain. The potential increase in the cost of claims, weaker investment returns and the lack of rate hardening has driven the more gloomy short-term outlook. As a result, headcount reduction and a cut in operating expenses seem firmly on insurers’ agendas for 2010.

“Although the life insurance sector reports an increase in optimism, this seems to be pinned on a hope of a future recovery in demand rather than short-term reality. The sector continues to report persistently weak customer demand for its core products and this is leading to a strong focus on cost reductions. Concern remains around the cost of compliance as the sector continues to focus on Solvency II implementation and other regulatory challenges.”

Pars Purewal, UK asset management leader at PwC, said: “Securities traders’ confidence has continued to grow but they are now taking a more measured view of their business prospects. The short-term outlook for revenues is muted, and though there are signs of a fresh drive to recruit new customers and increase headcount, however, the sector’s optimism remains tinged with caution.

“Concerns about future levels of demand remain strong, and the debt standstill requested by Dubai World during the survey period is a reminder of the potential for further financial shocks and their capacity to unsettle securities markets.

“Investment managers continue to take confidence from the recovery in equity markets and are enjoying a welcome period of relative stability. The sector has witnessed a resurgence in customer demand and retail and foreign activity is expected to strengthen further still.

“With revenues on the rise, the cost-cutting agenda which dominated the thoughts of many investment managers in early 2009 may be losing some of its impetus. Instead, the sector is increasingly focused on developing new products and in the short term at least, respondents are hoping to achieve organic growth through selling additional products to existing customers.”

Confederation of British Industry speaks for some 240,000 businesses that together employ around a third of the private sector workforce in the UK.