Capital Radio, Britain's largest commercial radio group, today said advertising revenue for the year would drop by 6%.

GWR, Capital's main rival, added to the gloom by predicting its revenues for the first half of the year would fall by 3.5%.

Capital said advertising income from April to June had fallen by 16% compared with the same quarter last year. Income generated between July and September was down 9%.

The group stuck to previous estimates, saying it would report a pre-tax profit for the year of £30m. Capital's pre-tax profit for 2000 was £41m.

However, Capital claimed the company remained attractive to advertisers.

"Although we remain cautious regarding current trends in the worldwide advertising market, we believe the longer-term prospects for radio advertising are very positive," the company said in a trading statement.

"Capital is the leading commercial radio company in the UK. We have market-leading brands, record audiences and a strong balance sheet."

Radio companies have been hit hard by the advertising slump and shares in Capital are trading at their lowest level for three years.

Yesterday, up to 30% of staff at Capital's interactive and digital divisions were told their jobs would be under threat if the advertising recession continues.

GWR was even more cautious in its statement, claiming economic and political confidence must return before the advertising market can recover.

GWR said: "The board remains extremely cautious about forecasting revenues. It believes the timing of a return to sustainable revenue growth will happen only when confidence on the political and economic fronts returns."