Optimism takes a dive in the business and professional services sector, survey reveals

THE PACE of growth in the business and professional service sector has softened as optimism fell sharply in the three months to August, according to the CBI’s latest quarterly Service Sector Survey.

Business and professional services firms, which include accountancy, legal and marketing firms, reported that business volumes were unchanged on the quarter, after rising in May.

However consumer services companies, which include hotels, bars, restaurants, travel, leisure, saw moderate growth in business volumes.

In the first quarterly Service Sector Survey since the UK’s decision to leave the EU, optimism in both sub-sectors fell sharply.

In business and professional services, it fell at the fastest pace in nearly five years, whilst in consumer services, it dropped at its fastest since the financial crisis in 2009. Business expansion plans in business and professional services were the weakest since May 2012.

Employment growth in both sub-sectors remained above average, and was at the strongest level this year in consumer services, but is expected to slow over the next quarter. Growth in spending on training and retraining also remained resilient.

CBI economist Anna Leach said: “Whilst the service sector has been rocked by the stormy waters of Brexit, especially when it comes to firms’ sense of optimism, the actual slowdown in growth on the office and shop floor has been relatively modest.

“It’s encouraging that employment numbers have remained robust, especially in the consumer services sector. But 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.”

Optimism about the business situation dropped (down 30 per cent) at its fastest since November 2011, as 10 per cent of firms said they were more optimistic than three months ago, whilst 40 per cent said they were less optimistic.