CBI: Service sector volumes continue to expand – but at slower pace

Rain Newton-Smith

Business volumes in the services sector continued to improve in the three months to November, but at a slower pace than seen in the previous quarter, according to the CBI’s latest Service Sector Survey.

Business volumes and values in consumer services – which includes hotels, bars, restaurants, travel and leisure firms – saw steady and strong growth, in line with recent quarters.

But while business values and volumes in business & professional services – which includes accountancy, legal and marketing firms – continued to expand, they did so at the slowest pace since 2013.

The survey of 173 firms showed that profit growth slowed in both sub-sectors, but that underlying conditions were more mixed. While cost pressures eased in business & professional services, in consumer services costs per person rose at the fastest pace in eight years, partly reflecting the continuing strong expansion of headcount and training expenditure.

Optimism about the business situation has improved over the last three months, and business volumes and profitability are expected to continue expanding at an above-average pace during the three months to February.

Hiring and investment plans also remain solid. Companies are increasingly investing to improve their efficiency and exploit new technology, with the share of companies citing this motive rising to a record high in the consumer services sector, and to a three-year high in business & professional services.

Rain Newton-Smith, CBI Director of Economics, said: “The UK services sector’s good run continues, and it’s encouraging that business volumes are expanding across the board, and that companies still expect healthy growth in profits.

“Employment growth is expected to slow a little in the quarter ahead, and given concerns over a lack of skilled workers – remaining close to a seven year high in business and professional services – companies are increasingly looking to invest in new technologies that could raise their productivity.”