Economy: CBI survey shows services sector recovery continuing to strengthen

CBI deputy director-general Katja Hall. CBI deputy director-general Katja Hall.

Tuesday, May 27, 2014
6:00 AM

The UK’s services sector is continuing to reflect an upturn in the economy, with rising optimism, strong growth in business volumes and firms taking on more staff, according to the CBI’s latest quarterly Service Sector Survey.

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Optimism increased in the three months to May at the fastest rate since the survey began in 1998 while business volumes rose for a fourth quarter, marking a full year of growth.

The survey of also found that companies have continued to take on more staff and increased their expenditure on training, amid signs of a skills shortage emerging as a constraint on future growth.

CBI deputy director-general Katja Hall said: “With a full year of growth under their belts, service sector firms are more upbeat than they have been for a long time.

“The recovery continues to strengthen with both consumer and business-facing firms taking on more staff and investing in training and IT.

“But a rising number of firms, particularly in business and professional services are having problems finding the right staff. This survey identifies a skills gap as a growing constraint on business expansion in the sector over the year ahead.”

Consumer-facing services, including hotels, bars, restaurants, travel and leisure firms regarded levels of business to be comfortably above normal. Business volumes rose strongly once more and growth is expected to pick up further in the coming quarter.

Despite a sharp rise in total costs, the profitability of these firms improved at the fastest rate since late 2006 while numbers employed grew strongly for the third consecutive quarter.

The business and professional services sector, which includes accountancy, legal and marketing firms, saw growth in business volumes rise to its fastest pace since 2006, and firms reported their level of business to be above normal for the first time since November 2007.

A rise in profitability gathered pace from the previous quarter and headcount has now risen for a full year while expenditure on training/retraining expanded at the fastest pace since February 2006.

Looking ahead, consumer-facing firms appear more bullish than business and professional services firms, although both sub-sectors expect business to expand over the next year, albeit at a slower rate.

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