Confidence rises in service sector
THE service sector, the biggest in the UK economy, saw the highest level of activity since 2007 and is experiencing an uptick in confidence, according to the CBI’s quarterly Service Sector Survey.
Endorsing views that a feel-good factor is returning in some parts of the economy at least, the CBI said optimism about future business in the business and professional services sub-sector – which includes accountants, law firms and marketing firms – is at a 15-year high.
Consumer services, such as hotels, bars, restaurants and the travel and leisure industries, saw business volumes rise at their fastest pace since August 2007, also in line with expectations. Business confidence grew for the fourth consecutive quarter. Profitability, however, fell unexpectedly, recording its largest decline since February 2012 as price growth failed to materialise.
The survey of 161 companies revealed expectations for a strong quarter ahead, with both sub-sectors expecting the fastest growth in value and volume of business since 2007.
However, while business and professional services firms expect overall profitability to continue to grow and further strong growth in headcount, consumer services firms expect another fall in both.
Investment and expansion plans for the year ahead have also diverged for the two sectors. Business and professional firms’ have their strongest expansion plans since February 2006, while consumer services firms are more cautious.
Stephen Gifford, the CBI director of economics, said: “We’ve seen a further build-up of momentum in the service sector this quarter, with business and professional services firms in particular seeing a turnaround in their fortunes.
“Confidence has risen strongly across the board, and the outlook is positive in the short-term. But consumer services firms are a bit more worried about the longer-term, and have scaled back their investment and expansion plans.
“Conditions remain tricky as households grapple with the prolonged squeeze on real incomes and business confidence remains vulnerable to any adverse developments in the global economy. But, all being well, business should continue to pick up through this year and into next.”
The Service Sector Survey was conducted between July 26 and August 14, with 97 business and professional services firms and 64 consumer services firms responding.
