Demand for financial services fell towards the end of last year, marking the first contraction since September 2013.
The latest CBI/PWC Financial Services Survey showed a fall in total business volumes in the last three months of 2018.
Investment managers reported the steepest fall in activity since the financial crisis, while volumes were flat for banks, building societies and specialist lenders.
But insurers saw continued expansion in their business volumes.
Rain Newton-Smith, chief economist at the CBI, said: "A combination of macroeconomic and Brexit uncertainty, regulatory compliance and global market volatility are taking a toll on the UK’s financial services sector.
"Financial services are a bellwether for the wider economy. The persistent weakness in optimism and the deterioration in expectations sound a warning for the outlook.
"It’s clear the sector is grappling with a number of other challenges too, from using data to improve customer experiences, to new entrants to the sector.
"However, with new risks and demands come opportunities. Insurers in particular are pulling ahead, many of whom are moving into areas such as asset management outside of their traditional markets."
The quarterly survey of 84 firms found similar falls were expected for the first quarter of 2019, the first time growth expectations had turned negative since December 2009.
Financial services firms - particularly banks, building societies and general insurers - saw macroeconomic uncertainty as the most important challenge over the year ahead, ahead of regulatory compliance and preparing for the impact of Brexit.
Andrew Kail, head of financial services at PWC, said: "UK financial services firms looking to prosper in 2019 should concentrate on issues they can control.
"Most importantly, by focusing on clear strategies for delivering value through products and services which meet their customers' needs, maximising the efficiency of delivering these services - keeping operating costs under control - and using technology to augment the quality and efficiency of activities across their business."
Profits in the financial services sector as a whole remained flat for a third successive quarter, reflecting little change in business volumes and costs - though investment managers and general insurers reported declining profitability.
In the three months to March, overall profitability is expected to fall for the first time in more than three years
Despite this outlook, firms expect to increase headcount in the quarter to March and investment intentions for the year ahead remain broadly stable.
