Written by: Keith Tully
Reviewed: Monday 26th August, 2019
Operators within the UK’s service sector saw their sense of optimism for the future slump significantly during the three months to August, according to the Confederation of British Industry (CBI).
The CBI’s latest numbers suggest that sentiment within what is a crucial engine of the UK economy declined sharply in recent months, with “Brexit uncertainty” and “slower global growth” both cited as key contributing factors.
Figures point to declines in sentiment matching those recorded towards the beginning of 2019, which were the sharpest falls in positivity seen since 2016.
Optimism fell in the three months to August within both aspects of the services sector, namely the ‘business and professional services sector’ and the ‘consumer services sector’.
According to the CBI, expectations about business volumes among consumer service sector companies, which includes hotels, bars, restaurants and travel businesses, were weaker in recent months than they’ve been at any point since February 2012.
Meanwhile, business volumes were stable among professional and business service firms in the three months to August but their “profitability plummeted” during that same period.
In fact, profitability among the UK’s business and professional service companies, which includes lawyers, marketing firms and accountants, fell at the sharpest pace seen since November 2011.
In both areas of the wider service sector, positivity on the issue of business expansion is now in very short supply and the underlying conditions within the economy for service sector companies is described by the CBI as being “subdued.”
“UK services firms are operating in a tough environment: activity is sluggish and profits are expected to fall in the coming months. It’s little wonder that business sentiment has plummeted again,” said Rain Newton-Smith, the CBI’s chief economist.
Ms Newton-Smith went on to say that the British government should be doing its utmost to avoid a situation in which the UK leaves the European Union without a deal at the end of October.
“The idea of a no-deal Brexit is clearly weighing down the economy and is affecting businesses both big and small,” she said in a statement.