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CBI survey indicates recovery in services sector has slowed down sharply

THE pace of recovery in the UK's dominant services sector has slowed sharply in the past three months, with growth in both business volumes and profitability decelerating, a key survey has shown.

The Confederation of British Industry declared that the survey, published today, chimed with its expectation of an easing of the UK economy's momentum in the second half of 2014.

On a more positive note, the survey shows that growth in numbers employed in the business and professional services sub-sector, which includes accountancy, legal and marketing companies, accelerated in the past three months to its fastest rate for nearly seven years.

Subtracting the percentage of firms in this sub-sector reporting a fall in staffing in the past three months from that experiencing a rise, a net 33 per cent recorded an increase. This was up from a balance of 23 per cent in the previous quarterly survey.

And expectations among firms in this sub-sector of the rate of growth in staffing over the coming three months are at their greatest since comparable records began in 1998, with a net 46 per cent anticipating a rise.

However, there was a sharp slowdown in growth in staffing in the consumer services sub-sector, which includes hotels, bars, and restaurants, and travel and leisure companies. Only a net five per cent of firms in this sub-sector reported an increase in staffing in the past three months.

This was well down from a corresponding balance of 34 per cent reporting a rise in the previous quarterly survey.

The balance of consumer services firms reporting a rise in business volumes in the past three months came in at 25 per cent, down from 42 per cent in the previous quarterly survey.

And the balance reporting a rise in profitability in the past three months came in at 26 per cent. This is down from 46 per cent in the preceding three months.

A net 16 per cent of business and professional services firms reported growth in business volumes in the past three months. This is down from a net 34 per cent in the previous three months.

In terms of profitability, a balance of six per cent of business and professional services firms reported a rise in the past three months. A net 20 per cent of firms had reported an increase in profitability during the preceding three months.

Firms in both the business and professional services and consumer services sub-sectors reported another strong rise in optimism in the latest quarterly survey, although this was not as sharp as the increase in the preceding three months.

Katja Hall, CBI deputy director-general, said: "The slowing in the pace of growth and profits in the service sector reflects our view that momentum in the economy will ease in the second half. But this doesn't necessarily mean a gear change in the recovery. It's encouraging that our service sector firms continue to feel upbeat, especially when looking ahead to the next quarter."

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