The latest CBI Services Sector Survey shows that optimism has fallen, as business volumes and profitability fell sharply in the three months to November.
Accountancy, legal and marketing firms are included in the business and professional services sector, who have seen optimism drop at the fastest pace since November 2016. It was also found to fall in the consumer services sector, including hotels, bars, restaurants and travel firms, despite improving in August.
The consumer services sector saw a steep fall in business volumes, expecting a further fall in the next quarter. Similarly, the business and professional services sector saw growth in business volumes slow, expecting a decline in the three months to February.
Regarding profitability, the business and professional services sector saw unchanged figures, however tge consumer services sector saw a large drop. For the next quarter, it is predicted that profitbailty will decline for both sectors.
In terms of cost pressures, these eased slightly. Selling prices rose steadily in the business and professional services sector yet for consumer services, price inflation slowed. For the next quarter, price inflation is expected to pick up.
Overall, economic growth is predicted to remain low. This is thought to be a reflection of the weak household income growth and fall on investments due to Brexit uncertainty.
CBI Chief Economist, Rain Newton-Smith explains how Brexit continues to ‘’take its toll on the UK’s services firms’’. Brexit uncertainty continues to take its toll on the UK’s services firms. Volumes and profitability are under pressure, and optimism about the business situation is falling across the sector.
“The first step to remedy this situation is for Parliament to pass the Brexit deal agreed between the UK and the EU. Whilst the deal is not perfect, it has two essential benefits for our economy. First, and most crucially, transition pulls the country back from the extremely damaging “no deal” cliff-edge that would harm jobs and living standards. Second, the agreement opens a route to a long-term trade deal, which must have ambitious access to the European marketplace for our world-beating services sector.”
Investment is set to be low for the following year. Spending on IT is expected to see growth, at the detriment of spending on vehicles, plant, machinery, land and buildings.
Concerns about the availability of skilled and unskilled labour rose for both sectors, though employment growth remained stable for each.
For both sectors, only a small minority of firms are expected to expand in the following year.
These recent statistics highlight a time of uncertainty for those within the services sector.