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Professional services sector growth at highest level since 2007, according to CBI


Accountancy, legal and other professional services firms experienced the fastest rise in business volumes since November 2007 in the last three months, according to the Confederation of British Industry (CBI).

The CBI's latest quarterly Service Sector Survey recorded increased activity and increased business confidence across the whole of the sector, which includes consumer services as well as business and professional services. Companies surveyed also predicted that they would experience the fastest growth in value and volume of business since 2007 over the next three months, the CBI said.

However, the business body said that companies in the business and professional services sector, which includes accountancy, legal and marketing firms, were predicting stronger performance in the longer term. Consumer services including hotels, bars, restaurants and the travel and leisure industries said that they were scaling back their investment plans, citing the decline in consumer spending, the CBI said.

"We've seen a further build-up of momentum in the service sector this quarter, with business and professional services firms in particular seeing a turnaround in their fortunes," said Stephen Gifford, the CBI's director of economics. "Confidence has risen strongly across the board, and the outlook is positive in the short-term."

"But consumer services firms are a bit more worried about the longer-term, and have scaled back their investment and expansion plans. Conditions remain tricky as households grapple with the prolonged squeeze on real incomes and business confidence remains vulnerable to any adverse developments in the global economy. But, all being well, business should continue to pick up through this year and into next," he said.

According to the CBI's figures, +39% of firms in the business and professional services sub-sector now plan to expand their businesses compared to those that do not. This is the strongest indication of future growth by these firms recorded by the CBI since February 2006; before the financial crisis. Among the surveyed firms, a balance of 22% took on more staff in the last quarter while +36% expect to do so over the next three months. Planned spending on IT in the year ahead also rose sharply on last quarter's figures, from +6% to +21%.

Optimism about business conditions among professional service firms rose by +36%, the fastest growth since the survey began in November 1998, the CBI said. Business volumes grew by +20%, and businesses expect to see a further +26% growth in the next three months, it said.

Profitability in the consumer services sector fell unexpectedly in the last three months despite the strongest increase in volume of business since August 2007 according to the CBI, suggesting that many firms were choosing not to pass price increases on to consumers. These firms were also more cautious about future expansion plans, recording weaker investment plans for land and buildings, IT, vehicles, plant and machinery. Numbers employed in the sector also fell below expectations, and is expected to fall still further in the coming quarter, according to the CBI.

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