Ernst&Youngâs (E&Y) ITEM Club Financial Services Outlook revealed that GDP is to increase by 0.9 per cent this year and 1.5 per cent in 2012.
The job market in the City is expected to be one of the casualties of this slow growth - employment levels fell by 14,000 during the second quarter of 2011 while the number of opportunities is expected to remain the same next year, the report explained.
Dr Neil Blake, senior economic advisor to the E&Y ITEM Club, said: âGiven the extent to which highly paid employment in the sector underpins consumer spending, tax revenues and house prices in the UK, the projections for financial services employment is concerning.
âThe government has set out to de-risk the sector and make the UK less reliant on it in order to make the economy more secure. Unfortunately, if no other sectors step into the resulting gap, prosperity will go down across the country.â
Further findings from the report showed that bank loan write-offs are also expected to increase because of the weak economic outlook.
The total is expected to be Â£3 billion more than originally forecast over the next few years, the report explained.
Previous research by E&Y revealed that many businesses are rushing to embrace new technologies such as cloud computing without analysing the security risks they create.
The study found that nearly three-quarters of respondents see risk levels rising but only 12 per cent discuss this in board meetings.
By Jim Ottewill