Banks, building societies and life insurers believe reducing the cost of regulatory compliance should be the new government's priority for the industry, according to the latest CB/PwC Financial Services Survey.

General insurers and investment managers ranked tax stability as their number one concern ahead of next week's Budget, in the survey covering the second quarter of 2015.

Over-regulation on pay creating an uneven playing-field with Europe was the biggest concern for banks headquartered in Scotland and the UK. PwC's Scottish chairman Lindsay Gardiner said: "Regulators will clearly be hoping the rules will help rebuild trust in the City, but experience suggests that structural pay changes and penalties have limited impact on behaviour."

Profits across the sector were up by 61per cent, the strongest rate since March 2011, while 24 per cent of firms (a net 13 per cent) increased employment in the quarter.

Business volumes and optimism continued to grow at an above average pace but more slowly than in the previous quarter

Trends in financial services incomes varied, with the value of fees, commissions and premiums falling from the previous quarter, weighed down by poor results among banks and building societies. However, net interest, investment and trading income continued to grow at a healthy pace.