The Courier & Advertiser (Perth and Perthshire Edition)
Services sector cautious as costs rise
The dominant UK services sector expanded over the summer but profitability declined.
The CBI said the quarter to August had been a “mixed bag” for the powerhouse sector.
Business advisory and professional services companies reported the fastest growth in new business volumes for more than a year.
Consumer service firms, which include hotels, bars, restaurants, travel and leisure firms, also reported expansion but at a more modest pace.
Despite the progress, the CBI’s latest Service Sector Survey found that levels of optimism within the consumer services sector had deteriorated during the period.
The availability of skilled labour was one major issue while rising costs was also causing concern.
In consumer services, firms reported the fastest rise in costs since February 2004 and a related squeeze on profitability.
The business and professional services sector also reported a sharp rise in trading costs.
“It’s fair to say that the performance of the UK services sector is very much a mixed bag this summer,” Anna Leach, CBI head of economic intelligence, said.
“While business volumes and numbers employed have risen, the impact of higher costs is harming the profitability of firms.
“With the latest GDP data showing no growth in consumer spending in the second quarter, it’s no surprise that consumer services firms are particularly downbeat.
“And the availability of skills and labour is a real risk to plans for investment and growth.
“This underlines the degree of care which will need to go into crafting the UK’s future migration system to ensure that firms have access to the people needed to underpin growth and prosperity.”