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The financial services industry has seen the largest fall in business for 17 years, a new report shows.

Research by the Confederation of British Industry (CBI) and PricewaterhouseCoopers found that both profitability and the volume of business has fallen for finance firms.

CBI chief economic adviser Ian McCafferty says: 'Profitability in the sector is being badly hit, so firms are trying hard to trim costs by planning to cut back on training and marketing for the first time in a number of years.'

He adds that current problems will 'echo throughout the wider economy' for the rest of 2008 and into 2009.

Of those financial companies questioned, 91 per cent believe it will be more than six months before the economy has recovered from the economic slowdown.

The survey shows that in the three months to early June, some 20 per cent of firms said the amount of business they had done had increased, while 55 per cent claimed it fell.

In addition, some 44 per cent of financial services firms said profitability in the sector had fallen, compared with 18 per cent of respondents in March.

Last week, the CBI reported that sales in the retail sector grew at a much slower pace than official figures from the Office for National Statistics showed.