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Boost In Service Sector Activity

28 May 2013


Immigration News

BUSINESS activity and confidence in the powerhouse services sector improved in the three months to May, raising hopes the UK's recovery may gather pace in the coming months.

The CBI's quarterly service sector survey showed optimism on future prospects was much improved in both the consumer and business and professional services sectors.

For consumer services – which includes hotels, bars and restaurants plus the travel and leisure industries – optimism was at its highest level since August 1999.

At 30, the net percentage balance – the difference between those replying in positive terms and those replying in negative terms – was far ahead of the six reading from February.

This appears to be based on a marked turnaround in volumes – which were at the highest level since August 2007 – and profitability which hit a balance of 21, meaning that figure was the largest since November 2007.

Expectations for profit in the next three months reached 34, the highest since May 2007.

Although employee numbers were in negative territory for the first time since August last year, the situation is expected to improve.

In business services, optimism was at a net balance of 29, far ahead of the zero recorded in February this year and the highest since February 2010.

However, there were still signs of the fragility of the recovery, with volumes in business services – including legal, marketing and accountancy firms – back in negative territory at -1 from seven in February.

Although profitability improved from -21 to -16, it remains rooted in the negative while employee numbers were flat.

Yet there are signs of better times ahead as the expectation of improvements in profit in the next three months was at 25, the highest since February 2007, with volumes and the hiring of staff predicted to accelerate across the summer.

Stephen Gifford, CBI director of economics, said: "There appears to be a sense of growing confidence in the service sector.

"We've seen some turnaround in activity this quarter, and a more positive outlook for the next.

"What's promising is that consumer services have seen growth in activity, and expect this to continue pointing to a greater willingness from people to go out and spend."

The survey of 170 companies, conducted between the end of April and mid-May, warned many consumer businesses have concerns over raising internal or external finance and this is likely to constrain capital expenditure.

Mr Gifford added: "There is concern around getting access to finance, so it is vital that growing firms look at the full range of funding options out there on the market. Conditions remain tricky, with consumers still grappling with a squeeze on real incomes, and business confidence vulnerable to any adverse developments in the global economy."

The health of the UK economy remains difficult to pin down with a mixed bag of economic data being released in recent weeks.

That has included household spending was only marginally up in the first three months of the year, retail sales were down in April and construction output is still struggling.

On a brighter note, inflation dropped between March and April, mortgage approvals reached a three-month high in April and the manufacturing sector has seen output improve.

Source: http://www.heraldscotland.com/business/markets-economy/boost-in-service-sector-activity.21189821

 


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