Service sector growth recorded in rolling quarter

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Services sector growth continues to take place across the UK

Businesses operating in the service sector enjoyed healthy levels of growth over the three months to the end of August, newly-compiled statistics show.

According to the latest CBI Service Sector Survey, this part of the UK economy, which includes the accountancy and legal professions, as well as the marketing industry and hospitality and leisure operators, reported increased volumes of business over the 12-week period.

Indeed, of those polled, 48 per cent reported an upturn in business volumes, while just 15 per cent said that volumes were down in comparison to the same time last year.

Moreover, one in five noted that they have been able to put up selling prices and other business rates, while just seven per cent complained of a drop in prices, suggesting that, as the UK economy in general continues to improve, firms in this specific sector are able to charge more for their specialist services.

This upturn in business volumes and value means that the service sector is steadily taking on more staff, the CBI report also shows.

Of those firms questioned for the study, 57 per cent said that they have recruited more staff over the three months to the end of August; with just nine per cent making cuts to their workforce, this balance of 49 per cent represents the biggest upturn in sector recruitment since November 2002.

Similarly, this upturn in fortunes is also encouraging many firms to look to the future, with investment in infrastructure, and in particular, in new IT systems, on the increase.

Releasing the findings, Rain Newton-Smith, director of economics at the CBI, said: "After a weaker start to the year, the UK services sector is now seeing healthy growth across the board with firms becoming more profitable, driven by a surge in business volumes.

“Companies are still looking to invest in people and capital, especially in IT which will help them exploit new technology and boost productivity."

At the same time, however, the same study also found evidence to suggest that certain challenges remain if the services industry is to carry on going from strength-to-strength.

Above all, a general feeling of uncertainty regarding the immediate and medium-term prospects of the UK economy is the greatest challenge facing many operators in the sector, with 43 per cent of respondents citing an uncertainty over future demands as the biggest challenge they are facing right now.

Meanwhile, one in three service industry firms feel domestic competition may hinder their future prospects, while one in four are worried that an ongoing lack of skilled workers could affect them as the look to grow.

On a more positive note in this context, the CBI only recently reported that growing numbers of UK businesses are taking action to address this skills gap, with many teaming up with universities to offer future graduates the talent needed to make the successful transition from education to work.

In fact, according to the latest figures from the business group, universities across the UK have spent some £900 million on improving their employability skills training over the past academic year as they look to help the private sector reduce the number of positions going unfilled.