Service Sector Growth as IT Spending Set to Increase

The majority of businesses in the UK’s service sector are anticipating improved business conditions and growth within the next three months, according to a new survey.

The Confederation of British Industry (CBI) said that its quarterly service sector survey had revealed the single sharpest rise in optimism within the sector in years, with optimism among consumer services firms, such as hotels and leisure businesses, about trading conditions in the next three months rising at its sharpest rate since September 1999, at +30%. Optimism among business and professional service providers, such as law firms and accountants, rose at its sharpest rate since February 2010, at +29%.

The +30 and +29 figures are representative of the net percentage of the 170 firms surveyed that displayed optimism about business conditions in the next three months relative to those that didn’t.

The CBI’s survey revealed that most businesses in the consumer services industry (+10%) recorded increased volumes of business during February, March and April this year, but more business and professional service providers than not (-1%) reported that the volume of their business had reduced during the same period.

Profitability fell during the quarter for most of the surveyed business and professional service providers (-16%), but the majority (+25%) expect to increase their profits over the next three months, the survey said. For consumer services firms results were better, with +21% reporting a rise in profits during February-April with even more (+34%) anticipating growth in the next quarter.

The CBI’s survey also revealed that most service sector firms are planning to spend more this year than they did in 2012 on IT, with +8% of consumer firms and +8% of business and professional service providers indicating a planned increase in IT expenditure.

“There appears to be a sense of growing confidence in the service sector,” Stephen Gifford, CBI director of economics, said in a statement. “We’ve seen some turnaround in activity this quarter, and a more positive outlook for the next. While activity has been pretty flat for business and professional firms, the outlook is much stronger.”

“What’s promising is that consumer services have seen growth in activity, and expect this to continue pointing to a greater willingness from people to go out and spend,” he added. “But there is concern around getting access to finance, so it’s vital that growing firms look at the full range of funding options out there on the market. Conditions remain tricky, with consumers still grappling with a squeeze on real incomes, and business confidence vulnerable to any adverse developments in the global economy.”



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