Service sector optimism continues to slide in CBI survey

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Thirty eight per cent of services firms feel less optimistic today than they did three months ago, while only 18 per cent feel more optimistic, a CBI quarterly survey has found.

The Service Sector Survey questioned 115 business and professional services firms and 44 firms in the consumer services space.

In the August survey, optimism dropped at its fastest rate since November 2011 resulting in a balance of 30 per cent that were feeling less optimistic than at the start of the quarter, compared to 20 per cent in today’s findings.

“We’re also seeing diverging fortunes in the service sector,” says CBI chief economist Rain Newton-Smith.

“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.”

Business volumes barely increased in the former, but rose modestly in the later, the survey found.

There was a decline in profitability across the sector as costs per employee rose against sluggish volumes growth.

Fifty eight per cent of firms said they did not expect to expand over the next 12 months.

However, Newton-Smith says: “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.”

Despite the gloomy outlook hiring intentions remained strong with a balance of 17 per cent stating they expected to accelerate hiring in the next quarter.

Capital expenditure would set to rise for IT, but be cut back for areas like land and buildings, vehicles, plant and machinery.