STELLAR growth among Britain’s accountants, lawyers and other professional services has catapulted the British economy to a 12-month high, a major report suggests.
The CBI’s latest growth indicator, which is based on the responses from more than 800 businesses, shows that growth quickened in the manufacturing and retail sectors over the past three months.
As we move through the second quarter, growth has cranked up
But it was business and professional services that was highlighted as the “stand-out performer” by the employers’ organisation – with the sector recording its fastest growth in work volumes since early 2006.
In remarks likely to be seized upon by the new Conservative government as evidence that its economic policies are working, the CBI said the fast pace of overall growth was expected to continue throughout 2015.
The group’s director of economics, Rain Newton-Smith, said: “As we move through the second quarter, growth has cranked up several gears and businesses expect that faster pace to continue.
“This supports our belief that the weaker-than-expected GDP growth in the early months of 2015 will be short-lived.
“A stellar increase in activity in the business and professional service sector and retail sales bounding ahead are clear indications of strong business and consumer confidence and increased spending power.
“UK exports are likely to be helped by renewed momentum in the Euro area but the stronger pound and weak demand in many overseas markets continue to pose challenges.”
A slowdown in Britain’s economic recovery at the start of the year was confirmed by official figures last week.
Gross domestic product (GDP) increased by just 0.3 per cent in the first three months of 2015, half of its rate in the fourth quarter of last year, and the worst performance since the end of 2012.
The revised figures from the Office for National Statistics showed that Britain’s powerhouse services sector, accounting for about three-quarters of output, had a more sluggish three months than first estimated.
Growth was also hampered by a dismal performance from overseas trade, with the deficit widening from £9.6 billion at the end of 2014 to £13.2bn in the first quarter. The period saw a spike in imports as exports slowed.
PwC chief economist John Hawksworth said: “As the domestic recovery continues and the Euro area economy gradually picks up, we would expect to see stronger UK GDP growth later this year, so the first quarter should be a temporary dip not the start of a more prolonged slowdown.”
The CBI said that while the swift pace of growth identified by its members was forecast to continue over the next three months, the balance between sectors was likely to change.
Responses from firms indicate that the rapid growth in the business and professional services sector will ease but remain “robust”. That will be made up for by stronger growth in the consumer services, retail and manufacturing sectors.
The growth indicator, derived from polls of 811 businesses across the UK, brings together economic activity data from a range of business sectors. The latest reading of +33 per cent for the three months to May was sharply up on the three months to April, at +19 per cent. It marks the highest balance since May 2014, when the indicator recorded +35 per cent.
The balance of expectations for output growth over the next three months – June to August – is +30 per cent. That is the strongest expectation since last August.