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Optimism Falls Sharply Among Service Sector Companies

Written by: Keith Tully

Published: 27th February 2019

Sector-CompaniesOptimism among service sector companies across the UK slumped in the three months to February, with profitability also having fallen during the period.

According to the Confederation of British Industry (CBI), sentiment worsened among both the business and professional services sector and the consumer services sector.

Among business and professional service operations, which includes law firms, accountancy practices and advertising companies, optimism declined at the sharpest pace since the financial crisis of a decade ago.

Meanwhile, among consumer service companies, which includes operators of bars, restaurants, hotels and travel and leisure businesses, optimism fell at the sharpest rate recorded since August 2016 and the aftermath of the UK’s Brexit referendum.

Service sector operators of all kinds saw their business volumes decline on the whole in the three months to February, with business and professional firms experiencing the sharpest declines seen since April 2013.

Profitability levels are also in decline among service sector operators and falling particularly sharply among business and professional service providers.

The service sector is the single most significant contributor to the overall scale of economic activity in the UK.

Rain Newton-Smith, the CBI’s chief economist, has described persistent uncertainty around Brexit and the UK’s departure from the EU as having an “unmistakably negative” impact on Britain’s services sector.

“Dimmed expectations for the year ahead mean it’s more important than ever for the UK to avoid a no-deal scenario, which would create a perfect storm of issues for our world-leading services firms,” she said in a statement.

“Until politicians can agree a deal that commands a majority in parliament and is acceptable to the UK and protects our economy, sentiment will continue to deteriorate.

“It is essential politicians act to remove the cliff edge from a sector that provides so much of Britain’s prosperity.”

Employment at service-based operators also struggled in recent months, growing at the weakest rate seen since February 2011 across the sector in the quarter to February, according to the CBI’s latest figures.

Business and professional service companies kept their headcounts almost unchanged in the quarter, while there was a slight fall in employment levels among consumer-facing service sector operators.

Keith Tully

Keith Tully

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Keith has been involved in Business Rescue since 1992, during which time he’s worked for both independent and national firms. His specialties include company restructuring matters and negotiating with HMRC on his clients behalf.

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