Record growth in services jobs reflects robust demand
across sector - CBI/Grant Thornton survey
Record growth in services jobs reflects robust demand across
sector - CBI/Grant Thornton survey.
Three months of unexpectedly buoyant growth in consumer services
and continuing high demand for business and professional services
have led to very strong growth in employment, the latest CBI/Grant
Thornton survey of the sector, reveals today (Thursday).
The number of jobs in professional services, such as
accountancy, law and property, rose at the fastest rate recorded
since the survey began in November 1998. And numbers employed in
consumer services, such as hospitality, travel and leisure,
increased at the strongest rate for two years. The proportion of
business services companies which says that the availability of
professional staff is likely to limit their ability to grow their
business over the coming year is higher than ever before.
Unexpectedly high demand for consumer services is reported in
the survey, echoing a similarly robust retail sector, which has not
yet been slowed by several interest rate increases. Demand for
business services has continued to grow strongly too, though below
expectations and these firms expect demand to grow more slowly in
the coming quarter.
The balance of respondents reporting an increase in prices was
above the survey average for the fifth successive quarter although
the proportion expecting an increase in the coming quarter has
eased slightly. Meanwhile, business services firms returned to a
stronger pricing position after three weak quarters, with the net
percentage of firms putting up prices the highest for five years.
On balance, business service providers expect prices to fall in the
next three months, however.
Over the past twenty years, the services sector has grown much
faster than the UK economy overall. By the end of last year,
government figures on the sector1 show that private sector services
accounted for over 55 per cent of all British jobs. In recent
times, the volume of services the UK exports has grown annually by
an average of 6.7 per cent and services now represents over a third
of UK total export values.
UK services trade at a surplus, helping to offset the deficit in
manufactured goods. Last year’s surplus was the largest, as a share
of GDP, since the Second World War.
Richard Lambert, CBI Director-General, said:
“The importance of the service sector to the UK economy cannot
be overstated. Today, it is the largest employer and a source of
national competitive advantage, with the City of London and our
creative industries leading the world. UK services firms of all
sorts are well placed to seize the advantage in rapidly developing
economies like India and China.
"Looking over the past quarter, the service sector has seen
strong growth. Consumer services firms have had an unexpectedly
good three months, while strong demand for business and
professional services has continued. Consumer services companies
expect the good times to continue, though the business services
sector is less certain about the next few months."
Alysoun Stewart, Head of Grant Thornton's Strategic Services
Group said:
“The service sector has been the powerhouse of the economy for
more than a decade and continues to provide the key to the UK's
future prosperity. The major constraint on continuing growth will
be filling vacancies. Consumer services firms are able to attract
lower cost labour thanks largely to immigration from Eastern
Europe. But for business and professional services firms recruiting
highly skilled individuals is proving a real struggle, forcing them
to boost their salary competitiveness.”
Unexpectedly strong demand for consumer
services
The highest balance of consumer services firms for three years
reported volumes of business had increased over the past three
months (+44%). Strong growth is expected to continue over the next
three - also the highest reading for three years (a balance of
42%). The value of consumer services business grew very strongly
too (a balance of 34%) and this is expected to accelerate, with the
highest balance since February 2005 expecting business value to
grow over the coming three months.
A net 43 per cent of consumer services firms reported higher
prices over the past three months, in line with the average balance
over the past four surveys. The rate of price increases is expected
to ease slightly over the next quarter, with a balance of 33 per
cent anticipating an increase in prices.
Numbers employed in consumer services grew at the fastest rate
since August 2005, with a balance of 21 per cent reporting an
increase, though costs per person grew at the slowest rate recorded
in the survey's history (a balance of 13%).
The overall profitability of consumer services firms has risen
at a very strong rate over the past quarter and, in the next three
months firms expect it to grow at the fastest rate in the survey's
nine year history.
Good quarter for business services but concern about
coming months
Over the last three quarters, business and professional services
firms have reported strong volume growth with a balance of 27 per
cent reporting an increase, though performance fell short of
earlier expectations. Growth in business values also continued
apace (a balance of 26% reporting an increase). Firms now expect
slower rates of growth in the volume (a balance of 17%) and value
(a balance of 11%) of business over the next three months.
After three quarters in which prices were reported to have
fallen, business services firms managed to raise average selling
prices over the past three months, at the highest rate for five
years (a balance of 14%). They do not expect to be able to sustain
this, though, and a balance of seven per cent expects prices to
fall in the next quarter.
With strong hiring in the business services sector, reflecting
the need for more people with the right qualifications and skills,
training expenditure rose at its fastest rate for over a year.
Similar growth is expected next quarter. Business services firms
also expect the cost per employee to increase in the next three
months at the strongest rate recorded in the nine years of the
survey.
Despite rising costs, the quarter's strong growth in volumes and
values meant that the balance of business services firms reporting
an increase in overall profitability hit a survey record (+32%).
However, firms believe the rate of profit growth will slow
considerably in the next quarter (+9%).