Majority of firms optimistic that the growth will continue

The poll found that 60 per cent of firms said business volumes are up while just 11 per cent said they are down in the three months to September, giving a balance of plus 49 per cent, which is the best reading since the credit crisis hit the UK economy in 2007.​

The report said the healthy momentum is expected to continue over the coming quarter.

Gary Shaw, PwC’s Yorkshire financial services leader, said: “The 100th CBI/PwC Financial Services Survey paints a picture of improving confidence and profitability.”

He said the report shows there is an increasing focus on new services and technology-enabled growth.

“Time will tell if established banks are underestimating their need for digital capabilities as we see a continued influx of new entrants without the chains of legacy systems, meaning that tougher competition is an increasing concern,” he said.

“There are hints of a new ‘war for talent’ and tighter monetary policy in 2015 could also pose a challenge.”​

Rising volumes helped push up overall profitability, which bounced back after the previous quarter’s contraction, despite costs rising at a record pace.

Rain Newton-Smith, CBI director for economics, said: “The UK’s financial services sector is enjoying its strongest run of growth since 2007, with activity rising across all customer categories and profitability bouncing back.

“The spike in costs was offset by a steep fall in the value of non-performing loans, suggesting that much of the fallout from the financial crisis is now working its way out of the system.”

She said that with competition one of the top concerns for the coming year, the sector could be moving to a new phase in the recovery where firms are feeling more assured about the level of demand, and are now shifting their gaze to competing for new customers and business.

“This is reflected in their expectation that sales to new customers will be the main driver of growth in the coming quarter,” she said.

The report said that worries about the impact of legislation at home and from Europe, such as new capital requirements and the prospect of a financial transaction tax, are increasingly weighing on the sector.​

“However, with strong broad-based growth, financial services firms are relatively upbeat about future prospects, despite some big geopolitical risks that remain on the horizon,” she said.​

The poll found firms had returned to hiring following the previous quarter’s fall in headcount, but this ​is expected to stabilise in the next quarter.

The CBI said that taking into account long-run trends, the results suggest employment in financial and insurance activities is forecast to stand at little over 1.15 million by the end of 2014.

This is 28,000 higher than the year before.

The report added that investment intentions are mixed with more spending slated on marketing and information technology for the year ahead, but investment in vehicles, plant and machinery is still due to be scaled back.

Growth in optimism about the overall business situation has been easing since the start of the year​.

The CBI said that this could reflect uncertainty about the outcome of the Scottish referendum​,​ which fell after the survey period, ​and the situation in the Middle East and Ukraine.

However it said that optimism has still risen at an above-average pace.

The survey of 109 firms operating across the sector was carried out between August 18 and September 4​.