Service Sector Growth Slows, Says CBI

Business Growth In Consumer Services Is The Slowest Since Last Year, According To Survey


Steven Beahan, Partner | +44 (0)114 294 7868

Growth in business volumes in consumer services showed a marked decrease in the three months to August, the latest services sector survey from the Confederation of British Industry (CBI) has revealed.

After multi-year highs in the previous quarter, profitability also grew at a slower pace.

But despite this, optimism is still rife as growth is expected to return in the coming quarter, with a total of 48 per cent of businesses more positive than three months ago and a mere four per cent feeling less upbeat.

And some aspects of the survey did show signs of improvement, as plans for investments over the coming year from the consumer services sector - which includes bars, restaurants, hotels, travel operators and leisure companies - reached a record high. This will see money spent on land, buildings, vehicles, machinery and plants.

In addition, the employment rate among the business and professional services sector - which includes legal, marketing and accountancy firms - showed the highest increase in nearly seven years, while expectations for the coming quarter are higher than at any point since the survey began in 1998.

Katja Hall, CBI deputy director-general, said: "The slowing in the pace of growth and profits in the service sector reflects our view that momentum in the economy will ease in the second half of the year.

"Employing more staff and planning to increase investment are positive steps in the quest for sustainable growth."

However, of the 215 companies surveyed, the general consensus revealed that factors such as a shortage of skills and reduced availability of professional staff were cause for concern and are likely to restrict business growth over the next year.

Ms Hall added: "It's important that business and government address this issue together, to put the economy of the future on the right footing."

Expert Opinion
While the decrease is disappointing, it is not entirely surprising considering the impressive increases seen across recent months. In addition, it is far from all bad news – particularly considering optimism remains very high in relation to what the future holds for many businesses in the services sector.

"Investment plans also reached a record high, which shows that many organisations are looking to make use of funds in order to develop their offerings and expand their services.

"Whatever the future holds for SMEs in the service sector, it is vital that they do not ignore the importance of having legal advice and support to hand as they look to navigate their way through some their growth plans."
Steven Beahan, Partner