Tuesday 27 August 2019 12:45 am

Optimism across UK's dominant service sector tumbles in second quarter

Optimism across the UK’s dominant service sector fell sharply in the three months to August, according to a new survey, in news that will worry policymakers as Britain flirts with recession.

Read more: Into the red: UK economy shrinks for first time in seven years in second quarter

The mood in the business and professional services was particularly subdued, the CBI’s quarterly service sector survey showed today, with expectations for growth at their lowest since 2009.

Britain’s economy shrank for the first time in seven years in the second quarter as the unwinding of Brexit stockpiling and global trade tensions damaged growth.

The service sector, which makes up almost 80 per cent of the UK economy, made a positive contribution to GDP growth in the second quarter. But signs are growing that it too is beginning to suffer under the weight of Brexit uncertainty and a global slowdown.

The CBI, which represents almost 200,000 British firms, said worries about a no-deal Brexit were “clearly weighing down the economy” and “affecting businesses both big and small”.

Optimism across the business and professional services sector, which includes accountancy, legal and marketing firms, fell to minus 31 on the CBI’s gauge, down from minus eight in February and close to post-financial crisis lows.

In the consumer service sector, which includes hotels, bars, travel and leisure firms, optimism fell to minus 28 from minus 12 in February.

Business and professional services firms were “extremely negative” about the outlook for expansion over the year ahead, the CBI said, with a score of minus 51 which was the second-lowest on record.

CBI chief economist Rain Newton-Smith said: “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.”

Newton-Smith’s organisations, said the government must avoid a no-deal Brexit, which it is widely thought will hurt the country economically.

“The outlook for services firms is bleak at the moment, with Brexit uncertainty holding back investment and expansion plans. The idea of a no-deal Brexit is clearly weighing down the economy and is affecting businesses both big and small.”

Read more: UK service sector posts modest growth but country ‘skirts recession’

“So the economy can get back on track, the government must re-double its efforts in securing a deal.”

(Image credit: Getty)