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Optimism dries up for UK services industry


© Reuters. FILEPHOTO: Walking across Waterloo Bridge, London during morning rush hour on May 18, 2022, Britain. REUTERS/Hannah McKay

Andy Bruce

LONDON, (Reuters) – Confidence is eroding in the service firms dominating Britain’s economy. This includes consumer-facing businesses that are the most vulnerable to the increasing cost of living.

According to the Confederation of British Industry, quarterly surveys of service companies revealed declining business activity expectations over the next months and mixed news about inflation pressure.

Companies in consumer services reported stagnant growth and predicted it would fall during the next quarter. Business and professional services, however, experienced significant growth but were expecting that this will stop.

The survey chimed with the closely-watched S&P Global (NYSE:) PMI gauge of business activity, which showed a severe loss of momentum in Britain’s economy this month and an increased chance of recession.

Ben Jones, a CBI economist said that services firms feel very depressed about their future prospects due to high inflation and cost pressures. The squeeze on household incomes already has an effect on consumer service activity, and there are fears for worse things this summer.”

Although consumer confidence reached a new 40-year record low, the majority of British business activity surveys had been quite strong up to this point.

Although expectations for prices rising among service providers to consumers have slowed a lot compared with previous surveys, these expectancies increased for businesses and professionals.

Jones reported that investment intentions have cooled due to falling profit margins.

Jones stated, “The government needs to act quickly in order to help those on low incomes and also restore business confidence so that firms can invest.”

CBI conducted a survey of 174 service companies from April 28 to May 13.