Business activity in the service sector has hit its highest level in six years adding further weight to the UK’s economic rebound according to the latest figures from the Confederation of British Industry.
The employers body’s Service Sector Survey, which includes accountancy, legal, and marketing firms, saw volumes rise at their fastest pace since November 2007 while confidence reached levels not seen since 1998.
As a result of the turnaround in business volumes, profitability recorded its strongest growth since February 2008.
Consumer services, such as hotels, bars, restaurants and the travel and leisure industries, saw business increase at its fastest pace since August 2007 while 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 the consumer and professional 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 says the research.
But investment and expansion plans for the year ahead have also diverged for the two sub-sectors. Business and professional firms’ have their strongest expansion plans since February 2006, while consumer services firms are cautious across all areas of investment.
CBI director of economics Stephen Gifford says: “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.”