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Services sector optimistic despite disappointing quarter

Businesses in the UK services sector are optimistic about growth and employment prospects for the next three months despite posting disappointing figures for the last quarter, according to a survey by the Confederation of British Industry (CBI).

The CBI surveyed 147 firms, 95 of which were from the business and professional services sector (including accountancy, legal and marketing firms) with the remaining 52 providing consumer services (including hotels, bars, restaurants and the travel and leisure industries).

In business and professional services, the survey found that:

  • business volumes fell unexpectedly (-8 per cent compared with +17 per cent)
  • overall profitability fell sharply and unexpectedly (-21 per cent compared with +10 per cent)
  • numbers employed were flat (+1 per cent), disappointing stronger predictions of rises (+13 per cent)
  • training spending fell, again disappointing expectations (-8 per cent compared to +13 per cent)

In consumer services, the CBI found that:

  • business volumes fell much more sharply over the quarter than expected in November (-16 per cent compared with -8 per cent)
  • overall profitability fell in line with expectations (-8 per cent)
  • numbers employed rose in line with expectations (+7 per cent compared with +8 per cent)
  • training spending fell well short of predictions (-11 per cent compared with +14 per cent)

Despite the figures, firms in both sectors showed signs of optimism for the next quarter. Numbers employed in both business and professional and consumer services are expected to rise by 15 per cent in the months ahead. Business volumes are expected to increase by 7 per cent and 11 per cent respectively. Firms from both sectors also expect to see an increase in IT investment.

The CBI's head of economic analysis, Anna Leach, said: "Despite the disappointing quarter, optimism remained stable and the outlook is brighter for the months ahead. Business volumes in both sectors are expected to grow and employment to pick up.

"The more bullish tone from consumer firms is encouraging but households are likely to remain cautious given the expected further squeezes on their budgets during 2013."