RISING costs are expected to fuel the fastest increase in prices charged by UK services firms for around a decade, writes Ian McConnell.
The Confederation of British Industry’s latest survey of the sector shows business and professional services firms’ expectations of increases in their average selling prices in the coming quarter are at their highest since February 2007.
Meanwhile, expectations of price rises among consumer services firms are at their highest since February 2008. In spite of plans to increase prices, both services sub-sectors expect to see declines in profitability in the coming quarter.
Various surveys have shown the tumble in the pound in the wake of the Brexit vote has fuelled UK companies’ costs, leading to increases in their prices. And annual UK consumer prices index inflation had by January surged to 1.8 per cent, from 0.3 per cent last May ahead of the vote to leave the European Union.
The CBI survey shows overall business volumes were flat for business and professional services firms in the quarter to February. However, consumer services firms posted their fastest increase in business volumes since August 2015 during the quarter.
The survey shows optimism fell only slightly in the business and professional services sub-sector in the quarter to February. This followed three consecutive quarters of more negative sentiment.
Optimism in the consumer services sub-sector showed a modest increase in the three months to February, following two consecutive quarters in which sentiment had deteriorated.
Both the business and professional services and consumer services sub-sectors increased employment during the three months to February.
Business and professional services firms cited uncertainty about future demand and sales as the factor most likely to limit capital expenditure.
CBI chief economist Rain Newton-Smith said: “The service sector is ticking along with business volumes holding up this quarter and a less pessimistic outlook on the office and shop floor than in recent months. Firms anticipate increasing pressure on margins.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here