The Confederation of British Industry says City firms are feeling the pinch, but we’re all still going down the pub
Service sector profits have slumped in the UK in the last three months but declining sentiment among the sector’s business leaders is slowing.
The Confederation of British Industry (CBI) said although morale among firms continued to drop, some sub-sectors were more positive. Hotels, bars and restaurants have been boosted consumer spending according to reports by Reuters.
Read more: Did Theresa May’s “pro business” CBI speech do enough to reassure firms?
But City firms were being hit. The CBI said business volumes at lawyers and accountants were stagnant over the last three months, furthermore these sectors were expecting them to fall in the months to come.
"Optimism among firms in the UK service sector has fallen… as rising costs and sluggish volumes of business have led to a drop in profitability," said Rain Newton-Smith, the chief economist at the CBI.
Read more: The service sector's "moved up a gear" – but inflation could get in the way
Many businesses are concerned about the weakened pound in the months following the Brexit vote. A weaker currency has an inflationary pressure on company's costs, meaning management are faced with either passing on the cost increase to customers, or reducing their profit margins.
The government said it expects growth to slow in 2017 to 1.4 per cent, down from 2.1 per cent expected for 2016.