Business activity and optimism in professional services have grown to levels not seen since before the 2008 crash, according to a survey by the Confederation of British Industry.
The sector, which includes legal, accountancy and marketing firms, saw business volumes increase at their fastest pace since November 2007 in the last quarter. As a result, profitability grew by 9% - the largest rise since February 2008 - with further growth expected in the next three months.
Based on a poll of 97 firms, optimism in the professional services sector rose at its fastest rate since the survey began in 1998. However, while business and professional services firms expect overall profitability to grow and further rises in headcount, consumer services firms expect falls in both.
Investment and expansion plans for the year ahead have also diverged for the two sectors. Business and professional firms are more bullish than at any time since February 2006, with more than a third expecting to expand their business and planned spending on IT set to rise sharply. In contrast consumer services firms that responded to the survey are cautious across all areas of investment.
Stephen Gifford, director of economics, 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. 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.’
The CBI’s quarterly service sector survey was carried out between July 26 and August 14, covering the previous three months.
The poll is the second this week to reflect increased confidence in the professional services sector. A survey of more than 200 senior finance officers at UK firms, carried out jointly by The CA magazine and DLA Piper, found nearly half (49%) of those polled believe the economy will experience ‘slow but consistent growth’ over the next year, compared to just 9.5% who expressed that view this time last year.
In contrast, only 6.6% believe ‘things will get worse before they get better’, a big decline from 2012 when 23% forecast worse times ahead. But despite improving economic confidence, the spectre of redundancies still looms large over the economy. A quarter (25%) of finance directors expect redundancies within their organisation this year, compared with 27% who expected the same last year.