Sentiment in the UK’s services sector fell at its fastest pace in two years, says CBI By Reuters
LONDON (Reuters) – Business conditions in Britain’s services sector are falling at their fastest pace in two years, partly due to tax increases in finance minister Rachel Reeves’ first budget on October 30, the Confederation of British Industry said on Thursday.
The decline was sharpest in consumer services – where large employers will bear the brunt of a 25 billion pound ($32 billion) rise in payroll tax – but the situation in business and professional services firms worsened, the CBI said.
Reeves told the CBI’s annual conference on Monday that he would not raise the tax in the same way, after a senior CBI official said businesses had been caught off guard by the tax increase.
Thursday’s survey showed that optimism among consumer services businesses fell the most since August 2022 at 55 in November, down from -19 in August, while among business and professional services sentiment fell to 29 from +9.
The index represents the difference between the percentage of businesses that say they are very optimistic and those that are very pessimistic.
“Slowing sentiment, weak hiring intentions and intensifying cost pressures are all at least a small response to the upcoming hike in employer National Insurance Rules,” CBI Deputy Chief Economist Alpesh Paleja said.
Business and professional services firms said their profits fell sharply from August 2020 and all types of service firms said they would invest less.
British business investment is low by international standards and this is widely seen as one reason for Britain’s lower economic productivity than its larger counterparts.
The darkness in the CBI study has also been reflected in other surveys. Last week the S&P Global purchasing managers’ index pointed to a recession for the first time in 13 months.
The CBI survey was based on responses from 441 firms collected between Oct. 29 and Nov. 14.
($1 = 0.7898 pounds)
