UK Services Sector Faces Profit Squeeze After Budget
The Confederation of British Industry (CBI) reports that Britain’s vital services sector is under severe pressure as rising costs and an inability to increase consumer prices are causing sharp declines in profitability and employment.
Key Findings
- Business sentiment and activity dropped significantly over the past three months
- Companies cannot pass rising costs to customers despite inflation pressures
- Profitability and employment levels fell sharply across the sector
- Further declines expected due to minimum wage increases and National Insurance changes
According to the CBI’s latest report, firms are bracing for another cost surge following recent Budget measures including minimum wage hikes and National Insurance adjustments affecting salary sacrifice pension contributions.
Charlotte Dendy, economic surveys and data manager at the CBI, said: ‘Businesses expect little near-term relief, with uncertainty about demand and persistent cost pressures set to constrain future hiring and investment plans. Last week’s Budget will add further costs to businesses.’
The business lobby group warns that uncertainty about consumer demand combined with persistent cost pressures will continue to limit hiring and investment across the UK’s services industry.
