Service sector sentiment and profitability drops as Brexit uncertainty drags on

Firms across the UK’s service sector have struggled with falling profits, business volumes and sentiment in the last three months as Brexit uncertainty continues to take its toll.

Business and professional service companies saw profits drop 24 per cent, at the fastest pace since November 2011, while consumer service firms said profitability fell 25 per cent.

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Optimism in the consumer sector fell seven per cent and business services optimism dropped eight per cent in the quarter to May, but at a slower pace than the 34 per cent seen in the previous quarter, according to the CBI.

Business volumes in professional services fell at the sharpest pace since August 2012, and consumer business volumes were down for the third consecutive quarter.

CBI deputy chief economist Anna Leach said; “Brexit paralysis continues to take a toll on the UK’s service firms. Profits, optimism and investment spending are falling sharply amidst a torrid operating environment.

“Politicians have wasted six critical weeks, allowing uncertainty to tighten its stranglehold on the British economy.

“Business and the country need Westminster to rule out No Deal, and deliver an urgent resolution to the Brexit mess.”

Analysts said that technology, health and some professional services firms were continuing to do well but added that “these bright spots are being outweighed by the fall in sentiment among other businesses and consumer services firms”.

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Chris Snood-Nicholls, Lloyds Bank Commercial Banking managing director, said: “The big question is to what extent the continued fall in sentiment is due to long-term factors, such as slow growth across the globe, or the result of a stall in investment due to a lack of clarity closer to home.

“We will only know for certain when, as we anticipate, the horizon clears and businesses begin spending again.”