Services sector profits fall sharply

28 Nov 2019

Profitability in the UK's services sector fell at the fastest rate in eight years in the three months to November, according to the Confederation of British Industry (CBI).

The CBI's latest quarterly services sector survey showed profitability fell sharply at -25% in the period, representing the fastest decline since November 2011. It is expected to continue falling at the same pace during the next quarter.

Cost pressures eased across the services sector, however the CBI said cost inflation 'continues to outpace price growth in services, putting pressure on profitability'. The employment situation was mixed: a fall in the business and professional services headcount was offset by growth in consumer services.

The survey showed that sentiment about the general business situation continued to deteriorate at -20%, but this proved to be a slower pace than the previous quarter's figure of -31%.

Commenting on the survey, Rain Newton-Smith, Chief Economist at the CBI, said: 'The current economic climate is holding back UK services firms, which are reporting falling sentiment, declining volumes and weaker profitability.

'Whoever forms the next government, it's essential they commit 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.'