Business booming for pubs, restaurants and legal firms

Optimism in the service sector at 15-year high after strongest trading since 2007, CBI reports

Pubs, hotels, restaurants, accountants and legal firms have enjoyed their strongest three months of trade since the beginning of the financial crisis, strengthening hopes that the UK economy is heading into a solid recovery.

A quarterly survey of the service sector by the CBI, the business lobby group, found the highest proportion of business and professional service firms reporting a rise in business volumes since November 2007 and the most positive outlook on profits since February 2008.

A total of 31% of the companies surveyed, which include accountants, lawyers and marketing firms, said business volumes rose, against 11% saying they had fallen – giving a positive balance of 20% for the quarter to August, the best reading since the early days of the financial crisis.

Optimism about the future was at a 15-year high, with a balance of 22% of companies saying they planned to hire staff and 39% expecting to expand their business. Among consumer services firms, such as hotels, bars and travel companies, a balance of 15% saw a rise in business volumes and a balance of 28% were optimistic about their prospects as the UK celebrated a warm and sunny summer.

But these companies said increased business was not translating into more jobs. They expected to continue to cut staff and rein in investment over the next quarter after profits unexpectedly fell back at the fastest rate for over a year as hoped-for price rises failed to come through. A balance of 11% said they had cut the number of people they employed and 24% said they would cut more jobs in the coming three months.

Stephen Gifford, the CBI's 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 picture is well illustrated by the experience of British visitor attractions. The Association of Leading Visitor Attractions, which represents venues from the British Museum to Blackpool Pleasure Beach, said its members had seen a 22% rise in visitor numbers this spring and summer compared with last year thanks to good weather, the legacy of the 2012 Olympics and the relative strength of the euro against the pound, which has encouraged visitors to cross the Channel.

But director Bernard Donoghue said visitor attractions were having to offer deals and keep prices down despite rising food and energy costs. "Visitor attractions know that where they do charge, the proposition has to be really attractive to appeal to a hard-pressed consumer," he said.

The CBI's largely positive survey of 161 businesses follows figures published last week that have boosted hopes the UK is heading into a strengthening recovery. On Friday the Office for National Statistics upgraded its estimate of economic growth in the second quarter of this year to 0.7% from 0.6%, making it the strongest three months since Britain got a temporary boost from the Olympics in 2012.

The figures indicated a broad-based bounceback as the improving economic climate in the eurozone lifts demand for British exports, while an uptick in the housing market and a decent summer had boosted consumer confidence.

Tesco and its market research partner, Dunnhumby, released figures over the weekend suggesting that consumer confidence is at its highest level for at least three years. They found that the proportion of consumers agreeing that the economic situation in the country had improved in the last few months had risen to 21% in July from 10% in April, while the proportion feeling that pressure on their finances was increasing dropped to 33% from 41%.

Last week, the CBI said it expected the economy to grow by 1% this year after releasing positive figures for the manufacturing sector.

Philip Clarke, chief executive of Tesco, suggested that good weather and Britain's sporting success over the summer, when Andy Murray won the Wimbledon tennis championship and England's cricketers secured the Ashes, had helped consumers feel more confident. But he warned: "The underlying picture is complex and it's not yet clear if the recent improvements in consumer confidence are thanks to these short-term factors, or part of a more significant shift."

Stephen Gifford at the CBI said: "Conditions remain tricky as households grapple with the prolonged squeeze on real incomes and business confidence remains vulnerable to any adverse developments in the global economy."

Article Source : http://www.guardian.co.uk

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