UK service sector weakens further as hotels and shops report slowing growth, survey says

The balance of manufacturing firms expecting the price of their goods to increase over the next three months fell slightly

Retailers reported particularly poor results (PA)

The UK services sector, a key driver of UK economic growth, weakened further over the last quarter, according to a respected survey.

Consumer-facing industries such as shops and hotels reported particularly weak growth rates, with business-focused firms faring slightly better, the British Chambers of Commerce’s quarterly survey showed.

Export sales and orders in the manufacturing sector remained solid and well above historical averages, while export activity increased marginally in the services sector but remains below historic levels, the BCC said.

The balance of firms expecting prices to rise has decreased across both sectors, but remains close to the historically high levels seen in the wake of the EU referendum. The percentage of manufacturers reporting raw materials as the key driver of increased prices remains near record highs.

The findings indicate that while confidence in future turnover and profitability is improving, the balance of service firms revising their investment in training upwards is also at historical lows, particularly for retailers and wholesalers. Both sectors report low levels of improvement in cash flow.

The balance of manufacturing firms expecting the price of their goods to increase over the next three months fell slightly to +34 per cent from a near historic high of +47 per cent in the previous quarter.

“It's time for the economy to be put back at the heart of the agenda, with a focus on creating the best possible environment for business growth all across the UK,” said Adam Marshall, BCC director general.

“Government must play its part by tackling the issues that hold businesses back, including labour shortages, weaknesses in our physical and digital infrastructure, and high upfront costs which dampen investment intentions and firms' growth potential.

"The subdued growth picture also underlines the importance of getting as much clarity on the Brexit transition as possible, as quickly as possible over the coming months."