Britain's financial services sector had a growth in business volumes during the first quarter of 2011, the Confederation of British Industry (CBI) said in a survey conducted with PriceWaterhouseCoopers.

The survey added that profitability was increasing in the UK banking sector, which is dominated by the "big four" of Lloyds, Royal Bank of Scotland, Barclays and HSBC, due to lower losses on loans.

"A third quarter of strong volume growth shows the financial services recovery is building strength," said CBI chief economic adviser Ian McCafferty. "While business with private individuals has again shown the fastest growth, business with companies also shows some signs of improvement. Firms' profitability has improved due to higher incomes and another big drop in the value of non-performing loans."

Financial services represent some 8 per cent of Britain's gross domestic product but the sector has been hit by the credit crunch and debt crises in Ireland and other European countries.

Britain's Independent Commission on Banking is also considering reforms which could see retail banks split off from investment banks, although analysts expect it to recommend ring-fencing retail and trading operations rather than a full break-up between the two.

The CBI/PWC survey was conducted between February 24th and March 10th, polling 94 parties from banks, building societies, insurers, trading houses and fund managers.

Reuters