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British service sector continues to grow

UK-based service providers experienced stronger than expected growth during the last quarter of 2017.

Leading economists had expected to see a slowdown in demand during the last part of 2017. Instead, there was growth of between 0.4% and 0.5%.

However, there are signs that this growth may not be sustainable. The rate of growth was the slowest it has been since August 2016. Some service firms put this down to Brexit-related uncertainty leading to clients being unwilling to spend.

During the month of December, there was only a moderate increase in the number of people being employed in the industry. The rate of new job creation also slipped to a nine-month low.

This is partly due to the efforts that companies are making to work more efficiently. Accountants in Liverpool, and other big tourist destinations, are working alongside their clients to identify ways to rein in labour costs in an attempt to remain profitable.

Rationalising staffing levels is also helping to prepare hotels, restaurants and other service sector participants for Brexit. Some in the sector are anticipating that it will become harder to find workers after the UK has left the EU, at least initially.

This year, service providers have had to start to pay higher wages. At the same time, they have seen other costs like food and fuel rise. For many months, firms have been absorbing these costs. Finally, the pressure is building up to the point where they have little choice but to raise their prices – a fact that will almost certainly lead to at least some fall off in demand. As a result, 2018 could easily turn out to be even more challenging than 2017 was.

Posted by Louise
January 18, 2018
Research & Statistics

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