By Andy Bruce
LONDON (Reuters) – The services companies that make up the bulk of Britain’s economy struggled in the three months to May and remain loathe to invest because of uncertainty around Brexit, a business survey showed on Wednesday.
Business and professional services companies reported the biggest fall in the volume of work since August 2012 and were “extremely negative” about the outlook for the year ahead, the Confederation of British Industry (CBI) said.
They expected to cut investment in land and businesses at the fastest pace since 2010, the survey showed.
The CBI said the volume of work also declined in the consumer services industry, albeit at a slower pace than in the business and professional sector.
Business investment fell throughout 2018 as companies waited for clarity on the terms of Brexit, and grew only slightly early this year. Consumer spending, meanwhile, has been the main driver of economic growth.
The CBI’s survey of 129 companies was conducted between April 29 and May 14 — after the EU allowed Britain to delay Brexit until late October to give lawmakers in London more time to approve a deal.
“Brexit paralysis continues to take a toll on the UK’s services firms. Profits, optimism and investment spending are falling sharply amidst a torrid operating environment,” CBI economist Anna Leach said.
On the upside, the CBI said services companies remained keen to hire staff — a finding broadly mirrored by a survey published on Wednesday by the Recruitment and Employment Confederation.
“The jobs market is robust, but more businesses remain negative about the future than positive,” REC chief executive Neil Carberry said.
Another survey from the British Retail Consortium showed shop prices rose 0.8% year-on-year in May, up from 0.4% in April and marking the second-highest rate in six years.
“Rising costs associated with currency depreciation, stockpiling, rising minimum wage and the Apprenticeship Levy, have all put upwards pressure on prices for a while, and it now appears that retailers cannot absorb them any longer,” BRC chief executive Helen Dickinson said.
(Reporting by Andy Bruce, editing by David Milliken)