Lack of growth a concern for UK services sector

Growth in the UK services industry is stagnating and could be set to decline, potentially posing a threat to firms in the sector, a new report claims.

The sector that accounts for the majority of UK businesses requires immediate support if potential negative impacts on the economy are to be limited, according to advisory firm BDO LLP.

The Output Index for the services sector focuses on how order books should develop in the next three months and dropped to its lowest level since June 2013 in May.

The figure of 95.0 in May is a level that indicates recessionary conditions, while a slowdown has been noted since August 2015.

Volatility in the currency markets and uncertainty surrounding the EU referendum have also had an impact on the sector, mainly in the form of reduced consumer spending power.

Rising inflation is also stretching budgets which is having a knock-on effect on service industries such as retail and hospitality.

The manufacturing sector meanwhile noted an increase in output between April and May, while optimism in the sector is at a three year high.

Such is the slowdown in the services sector that the UK economy is now tied with Italy as the slowest growing of all G7 economies.

Optimism for the future remains to an extent, based in positive forecasts for the coming months, but with activity slowing down more firms are deemed to be under threat.

Efforts to boost small businesses and the wider economy should provide a boost for the remainder of the year, but the true impacts of the EU referendum are not yet clear.

Should businesses in the services sector be unable to access alternative finance options or get a grip on their finances, their long-term futures could be thrown into doubt.

The key for any firm facing difficulties is to act quickly and effectively, as seeking advice from corporate recovery specialists at the first opportunity can increase the likelihood of finding positive solutions.

By Phil Smith


If you would like to have a free no obligation chat with one of our advisers please call us on 0207 186 1144.

View all Business Insights