Optimism Dries Up For UK Services Industry - CBI Survey

Confidence is draining away from the services firms that dominate Britain's economy, especially in consumer-facing companies which are most exposed to the worsening cost-of-living crunch, a survey showed on Thursday.

The Confederation of British Industry's quarterly survey of services companies showed declining expectations for business activity over the coming months, and mixed news over inflation pressure.

Consumer services companies reported that growth was at a standstill and expected it to fall in the coming quarter, while business and professional services had experienced growth, but expected that to cease.

The survey chimed with the closely-watched S&P Global PMI gauge of business activity, which showed a severe loss of momentum in Britain's economy this month and an increased chance of recession.

"Services firms are feeling pretty despondent about their immediate prospects in the face of cost pressures and high inflation," CBI economist Ben Jones said. "The squeeze on household incomes is already having an impact on activity in consumer services, with fears of worse to come over the summer."

Until recently, most surveys of British business activity had been fairly robust, despite record-low consumer confidence after inflation hit a 40-year high of 9%.

Expectations for price increases among consumer-facing services companies in the coming three months receded a little compared with the previous survey, although they intensified for business and professional services firms.

Investment intentions cooled, reflecting rising reduced profit margins, Jones

"The government should act now in support of those on lower incomes but also help restore business confidence and get firms investing," Jones said.

The CBI surveyed 174 services companies between April 28 and May 13.