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A new survey has indicated that the credit crunch is continuing to have dampening effect on business within the financial services sector.

The Confederation of British Industry (CBI) and PricewaterhouseCoopers found that 17 per cent of those questioned from within the financial services sector said the amount of business conducted had increased during the last quarter, compared with 47 per cent who reported a fall.

Meanwhile, businesses within the sector have 'very weak' capital investment plans, although the organisations noted that marketing expenditure plans have 'pick up'.

Ian McCafferty, chief economic adviser at the CBI, says that the credit crunch has 'worsened' over the first few months of this year.

'We can expect further tough times in the financial sector, and as this feeds through into the wider economy it will inevitably be felt through slower economic growth this year and next,' he comments.

The CBI recently reported that the retail sector was also experiencing challenging conditions last month.

According to the organisation, retail activity 'remained subdued' in March.