Rising costs hit businesses
According to Confederation of British Industry’s (CBI) latest quarterly Service Sector Survey, the sector saw a decline in optimism in the three months to November.
Business and professional service firms, which includes accountancy, legal and marketing firms reported that business volumes barely increased and they are expected to fall further in the next quarter.
Some 29 per cent of firms reported an increase in volumes compared to the previous quarter whereas 27 per cent said they were down.
Consumer Service companies which includes hotels, bars, restaurants, travel and leisure saw business volumes grow modestly with the expectation of faster growth in the next three months.
A huge 30 per cent of these firms reported a rise in business volumes, this is compared to 22 per cent who said they were down in the last three months.
Employment growth is expected to accelerate in the next quarter. Particularly for consumer services as 45 per cent of businesses said numbers of employed were up on three months ago.
Rain Newton-Smith, CBI chief economist, said: “Optimism among firms in the UK service sector has fallen this quarter, as rising costs and sluggish volumes of business have led to a drop-in profitability.
“We’re also seeing diverging fortunes in the service sector. Business and professional services expect to see weaker growth in volumes next quarter while the resilience of the British shopper is boosting the outlook for consumer services.
“The Autumn Statement will have offered some comfort to businesses as the Government looks to build on the UK’s economic strengths, with an Industrial Strategy that helps deliver growth across the country.”