The CBI has urged the government to outline its plans for its Brexit negotiations as optimism slumps in the services sector following the UK’s vote to leave the European Union.
In its first quarterly survey since the Brexit vote, the CBI found optimism in business and professional services fell at its sharpest rate since November 2011, with 10 per cent stating they were more optimistic compared to 40 per cent who said they less optimistic.
In consumer services 15 per cent of firms said they were more optimistic than three months ago, compared to 52 per cent that said they were less optimistic, its lowest level since February 2009.
It comes as director-general Carolyn Fairbairn calls on the government to secure reciprocal financial services access when it negotiates the UK’s exit from the European Union, according to the Financial Times, warning firms are already considering moving jobs and operations.
Fairbairn has also called on the government to scrap its punitive 8 per cent levy on banks’ profits in order to make them more competitive.
Despite the pessimistic outlook in the CBI survey, business volumes were unchanged in the three months to August for business and professional services, while consumer services companies saw moderate growth.
In business and professional services, 22 per cent said business was up over the quarter compared to 20 per cent who said it was down. These figures were 26 per cent and 19 per cent respectively for the consumer services sector.
CBI head of economic analysis and surveys Anna Leach says: “Looking ahead, the service sector faces a challenging environment in which to grow and invest, with uncertainty about demand weighing on firms’ minds.
“To shore up confidence across the economy, the government must clearly communicate plans for negotiations to leave the EU, and demonstrate its commitment to stimulating growth and driving investment with an ambitious Autumn Statement.”
Thirty nine per cent of firms said they expect to expand their business, while 60 per cent did not, the lowest balance since May 2012, with 66 per cent citing uncertainty about demand as a factor.
Business and professional firms intend to slightly cut investment in land and buildings, as well as vehicles, plant and machinery in the year ahead, while IT investment will continue to grow.
In consumer services, capital expenditure on buildings and land will grow, but at a slower pace.
Leach says it is encouraging that employment numbers have remained robust, especially in the consumer services sector, where 33 per cent of businesses said numbers employed was up, compared to 5 per cent who said it was down.
In business and professional services 23 per cent said employment numbers were up compared to 8 per cent who said it was down.