Optimism among businesses in the UK services sector fell again in the three months to November, new survey data has shown, but at a slower pace than in the previous quarter.
Business and professional services firms had a worse quarter than those in the consumer realm and intend to cut back staff and reduce investment in 2020, according to the CBI’s quarterly survey of the sector.
The services sector makes up over 75 per cent of the UK economy. It has held up well in 2019 while business investment and industry has suffered, but some cracks are beginning to show.
CBI chief economist Rain Newton-Smith said the current “climate” of Brexit and General Election uncertainty was “holding back UK services firms”.
On top of falling sentiment, firms reported declining order volumes and weaker profitability.
Firms in the business and professional services sub-sector cut back on staff in an effort to deal with these problems, the survey showed. They also expected to cut back on investment in land and buildings, as well as in vehicles, plant and machinery.
Consumer services performed better, however, with employment expanding at a steady pace. Investment intentions were also stronger.
Business and professional services firms were pessimistic about the year ahead, while consumer companies were neutral.
Newton-Smith said the outlook was not expected to improve, “with firms pessimistic about their prospects for expansion, investment plans having been scaled back and hiring on hold”.
As Britain gears up for a General Election on 12 December, she said it is essential the next government commits “to refocusing on the domestic agenda, to propel the UK economy forward – prioritising skills and infrastructure investment, as well as reaching net zero by 2050”.