At least 12,000 jobs are likely to be lost from the financial services sector over the coming three months, according to figures from employers body the Confederation of British Industry (CBI), as the fund management industry is sucked into the gloom surrounding the rest of the sector.

The CBI said that 61 of the 100 firms it contacted for its quarterly survey had reported falling business volumes in the three months to early September, with only 10% saying they had risen. The balance of -51% is the weakest result since the survey started in December 1989.

As a consequence, the numbers of people employed in the sector fell, with a balance of 16% shedding staff. This is set to get worse with a balance of 44% expecting to cut posts in the coming months, a level which CBI statisticians say based on past trends is likely to see a minimum of 12,000 jobs going.

Government figures show that 8000 posts were shed from the sector in the three months to June out of a total workforce of one million people.

CBI deputy director-general John Cridland, who last week warned policymakers to "pause" in intervening in the sector, held out little hope for government action to avert job losses.

"I think most people accept that when you have an economic downturn you cannot do very much except help people deal with the worst aspects of the distress."

The banking sector, which reported little in the way of job losses in the three months to September, seems set to bear the worst of the cuts in employees.

The industry has already been rocked by the announcement by HSBC last week it was axing 500 posts in its investment banking arm, while Bradford & Bingley said it was shedding 370 posts, with more expected, as it cuts back its mortgage lending.

There are also concerns about the impact of Lloyds TSB's proposed takeover of Edinburgh-based HBOS, with analysts expecting anything between 20,000 and 40,000 posts to go.

The CBI figures showed that few banks cut jobs in the last quarter but a net 52% expect to do so in the coming three months. Responses from building societies, finance houses and insurance companies indicate they also expect to see a dramatic drop in job numbers.

The survey was conducted in late August and earlier, but events since are likely to have boosted confidence with HBOS's cut-price takeover by Lloyds TSB and the US government's takeover of Washington Mutual among the most dramatic events.

The most dramatic turnaround in sentiment was in the fund management industry, where expectations for volumes of business fell from +93% three months ago to -100%.

Robert Mellor, financial services tax leader at accountant PricewaterhouseCoopers, which helped compile the survey, said: "They are clearly moving into the same negative territory as other sectors are in."

He said that until now fund management firms had regarded themselves as removed from the direct effect of the credit crunch.

"Even if that is the case, the fact is that they cannot avoid the impact of an economic downturn," he said.

But he added that while they are increasingly resigned to a long downturn, most firms show no sign of cutting jobs at present.

Profitability in the financial services sector declined at a record rate with a balance of 49% of firms reporting a fall, a rate that is expected to continue for the coming three months.

There are also signs that a slowdown in the financial sector will reverberate further, with lower capital expenditure on property and, unusually for the sector, information and marketing expenditure expected in the next year as firms seek to cut costs.

But there is no end in sight with virtually every financial services company (995) expecting it to be more than six months before financial market conditions return to normal.

Cridland said: "Difficulties in this crucial sector will have huge implications for the rest of the UK economy."

He added that the government might have to adjust its spending plans as financial services companies' tax bills fall with profitability. "The fiscal implications of this survey are significant," he said.