City gloom deepens at fastest since 2008 amid Brexit fears

Gloom in Britain's financial services sector has deepened at its sharpest rate since the financial crisis, a new poll shows.

It comes as global banks consider plans to relocate staff in the wake of the Brexit vote.

A CBI/PwC poll of financial services firms showed optimism fell for a fourth consecutive quarter in the three months to December - the longest run of declines since 2008 - as the sector was hit by uncertainty.

Official growth figures for the October-December period will be published later this week and are expected to show the economy continued to perform robustly despite Brexit fears.

But a slowdown is expected to follow this year, with a new forecast from EY ITEM Club seeing a prolonged period of subdued growth as the UK faces a "hard rebalancing".

Banks and other financial services firms are making plans for life after the UK leaves the European Union following Theresa May's confirmation last week that this will mean leaving the single market.

That is expected to make it harder for the City to retain "passporting" rights that allow firms to operate freely across the European Union.

HSBC and UBS (LSE: 0QNR.L - news) issued fresh warnings a day after the Prime Minister's speech that Brexit could mean each of them moving 1,000 workers out of London.

On Monday, it was reported that US banks Morgan Stanley (Xetra: 885836 - news) and Citigroup (NYSE: C - news) had identified many roles that would have to be moved out of Britain.

Sources told Reuters that Morgan Stanley would have to relocate up to 1,000 jobs while Citigroup would have to shift 100 positions.

The CBI/PwC poll found only 10% of financial services firms were more optimistic about the overall business situation, with 45% less so - giving a balance of -35%, the worst since the end of 2008.

Andrew Kail, head of financial services at PwC, said: "Uncertainty has contributed to the low levels of optimism reported by many financial services companies, particularly by the banks."

The EY ITEM Club's latest forecast pencils in growth of 2% for 2016 followed by 1.3% for 2017 and 1% in 2018.

It points to the slump in the pound - which makes imports more expensive - pushing up inflation and holding back consumer spending

Sterling's weakness - which helps exports to be more competitive - will mean a "sea change" in the economy, forcing it to be less reliant on consumer spending and more focused on overseas trade, the report says.