Spending on technology by banks and securities trading firms is slowing down as the effects of the credit crunch start to take hold, according to the latest survey from the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC).
In a bleak report, the CBI says the UK's financial services industry will shed as many as 10,000 jobs in the next three months to cut costs following the global credit crisis.
But as well as cutting jobs, firms will cut back on other investments in order to reign in costs. As a result, plans for capital investment in the year ahead are very weak, with plans for spending on IT flat, warns the CBI.
Banking has been hit particularly hard in the first three months of the year, with volumes and staffing levels plummeting. As a result banks' investment intentions have "turned negative, even for IT, on reduced inclinations to expand capacity, reach new customers and provide new services", says the CBI.
Securities traders also saw a sharp fall in business and they now expect marketing budgets to be flat and that "the growth in IT spending will decelerate in the year to come, relative to last year".
However the picture is more positive for building societies. Although less optimistic about business than three months ago, building societies are still expecting to increase spending on technology and on compliance.
Meanwhile the continuing shift to direct channels such as the Internet will help drive up technology spending by general insurance firms, says the CBI.
The CBI's latest forecasts appear to contrast a report released in January when it said capital investment plans for IT "are at their strongest since September 1997".