The financial services industry including banks and securities firms are cutting back on IT investment as a consequence of the economic slowdown, according to research from the Confederation of British Industry (CBI) and PricewaterhouseCoopers (PwC).

Business volumes in the sector have plummeted, with 47 per cent of the 79 institutions surveyed saying they saw a decrease in the first quarter. As a result, the industry will shed 10,000 jobs to cut costs, according to the report.

Technology is likely to be one of the areas where cost-cutting will take place, with plans for spending on IT flat across the sector.

Although some large banking institutions such as Barclays have declared they will continue investing in IT in the coming year, the picture painted by the CBI is bleak.

“Investment intentions have also turned negative, even for information technology, on reduced inclinations to expand capacity, reach new customers and provide new services,” said the report.

Securities traders have followed the same trend, with growth in IT spending to slow down in the coming year.

But building societies are still expecting to increase spending on technology and compliance, according to the survey.

Nationwide Building Society is investing £300m over the next four years in an IT-enabled business transformation plan, with up to 80 per cent of the spending to cover technology projects.