Firms’ expectations for the next quarter are for a 30% decline in business volumes.
Business volumes were steady in the first quarter of the year, the survey found.
The quarterly survey of 103 firms, conducted between 2-26 March, found that business volumes, profitability, and employment are all expected to drop fall markedly over the next quarter.
Firms’ investment plans for the year ahead have also deteriorated.
Profitability fell slightly in the three months to March (-4%), but while profitability fell in banking and life insurance, it grew in finance houses, insurance broking, general insurance and investment management.
Next quarter, profitability is expected to fall overall by 15%.
Rain Newton-Smith, CBI chief economist, said: “The bulk of the survey took place before social distancing measures were ramped up, but there were already signs of the Covid-19 pandemic leaving its mark.
“Expectations for business volumes and headcount weakened, non-performing loans rose sharply, and financial firms are planning heavy cuts to investment in the year ahead.
“Financial services are already playing an essential role in helping companies with their cashflow, through channelling funds from the government’s support schemes.
“But like other businesses, they’ve also been struck by staff shortages and changes to how they operate. As a result, alleviating capacity pressures and streamlining how firms access government support through our financial institutions is vital. With the peak of the economic impact to come, equipping the sector to deliver for business is crucial in supporting the growth recovery beyond the pandemic.”
Andrew Kail, head of financial services at PwC, said: “The Covid-19 pandemic is one of the most significant tests of operational resilience the financial services sector has seen.
“The financial services sector must continue to work with customers, the government and the regulators to help the economy recover in the best possible shape.
“Services it provides across banking, insurance and asset management are central to the sustainability of the corporate sector and millions of people.”
During the quarter employment fell (-9%) at the fastest pace in a year (-21%), driven by the banking sector. Headcount is set to decline at a much faster pace next quarter (-37%), the weakest expectations since March 2009.
Marketing spend is set to be cut back in the year ahead, to the greatest degree since June 2009 (-32%).
Overall optimism in the financial services sector declined significantly. Some 12% of firms said they were more optimistic about the overall business situation compared with three months ago but 53% were less optimistic, giving a balance of -41%.