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| Rising costs and slower consumer spending hit service sector, says CBI | |
| (35 minutes later) | |
| The strain of sluggish consumer spending and rising wages hit profits and dented the optimism of the UK’s services sector in November, according to the Confederation of British Industry. | The strain of sluggish consumer spending and rising wages hit profits and dented the optimism of the UK’s services sector in November, according to the Confederation of British Industry. |
| Predictions of a healthy Christmas failed to lift the sector’s spirits after falls in the pound and a rise in the government national living wage increased costs, a survey by the CBI found. | Predictions of a healthy Christmas failed to lift the sector’s spirits after falls in the pound and a rise in the government national living wage increased costs, a survey by the CBI found. |
| A post-referendum fall in consumer confidence has added pressure on the services sector, and resulted in 18% of firms saying they were more optimistic than three months ago, against 38% who said they were less optimistic. | A post-referendum fall in consumer confidence has added pressure on the services sector, and resulted in 18% of firms saying they were more optimistic than three months ago, against 38% who said they were less optimistic. |
| The survey is the latest illustration of the economy that has shown growth to be more robust than many forecasters expected, but on course for a slowdown over the next year. | The survey is the latest illustration of the economy that has shown growth to be more robust than many forecasters expected, but on course for a slowdown over the next year. |
| The CBI’s latest quarterly service sector survey showed that business and professional services firms, which include accountancy, legal and marketing firms, expect sales to fall during the coming months after a small increase in the last three. | The CBI’s latest quarterly service sector survey showed that business and professional services firms, which include accountancy, legal and marketing firms, expect sales to fall during the coming months after a small increase in the last three. |
| But at consumer services companies, which include hotels, bars, restaurants, travel firms and leisure businesses, sales volumes grew modestly, with expectations for faster growth in the next three months. | But at consumer services companies, which include hotels, bars, restaurants, travel firms and leisure businesses, sales volumes grew modestly, with expectations for faster growth in the next three months. |
| Nevertheless, the report said: “The share of firms expecting to expand their business over the year ahead were in a clear minority in both subsectors.” | Nevertheless, the report said: “The share of firms expecting to expand their business over the year ahead were in a clear minority in both subsectors.” |
| The services sector accounts for more than three-quarters of the economy. It has kept the economy moving ahead over the last couple of years while the manufacturing and construction industries have spent time in recession. | The services sector accounts for more than three-quarters of the economy. It has kept the economy moving ahead over the last couple of years while the manufacturing and construction industries have spent time in recession. |
| The trend for increased spending on leisure activities and one-off events has proved a standout feature of the UK’s GDP growth, with hotels experiencing a boom in short-stay breaks. | The trend for increased spending on leisure activities and one-off events has proved a standout feature of the UK’s GDP growth, with hotels experiencing a boom in short-stay breaks. |
| Rain Newton-Smith, the CBI’s chief economist, said that while optimism had declined, employment growth remained strong, with service sector firms looking to hire in the coming months. | Rain Newton-Smith, the CBI’s chief economist, said that while optimism had declined, employment growth remained strong, with service sector firms looking to hire in the coming months. |
| “Many firms still plan to invest in IT, but uncertainty over future demand could act as a restraint,” she said. | “Many firms still plan to invest in IT, but uncertainty over future demand could act as a restraint,” she said. |
| “The autumn statement will have offered some comfort to businesses as the government looks to build on the UK’s economic strengths, with an industrial strategy that helps deliver growth across the country.” | “The autumn statement will have offered some comfort to businesses as the government looks to build on the UK’s economic strengths, with an industrial strategy that helps deliver growth across the country.” |
| Growth in spending, and intentions to spend, on training and retraining were encouraging, particularly in consumer services, she added, but firms also planned to reduce investment in other areas, such as land and buildings, vehicles, plant and machinery. | Growth in spending, and intentions to spend, on training and retraining were encouraging, particularly in consumer services, she added, but firms also planned to reduce investment in other areas, such as land and buildings, vehicles, plant and machinery. |