Business services 'to grow for five years'

Business services is likely to shrug off cuts in government spending "to grow in most sectors and could grow significantly if outsourcing is used to cut costs," a report out today from CEBR says.

"Looking at the individual subsectors for business services, the stellar performer is set to be IT," the report says. "This sector is forecast to grow at an annual rate of 5.1 per cent to 2015 and will drive employment growth, creating an additional 93,000 jobs by 2015."

Shehan Mohamed, co-author of the report, said: "The good news is that this report shows a vibrant economic sector with some highlights such as the IT sector, which should lead the recovery."

Such an upbeat scenario would be welcomed by the government amid estimates that 100,000 public servants will lose their jobs by next spring.

The CEBR report said business services was set for five years of "steady growth", but that "sluggish GDP growth and cuts in public procurement are likely to mean that the growth rate is slower than in the past".

Business services grew at a compound rate of 6.4 per cent from 2004 to 2010, which included the 2008/9 recession. The latest report forecasts growth of only 2.7 per cent for 2010-15.

Consultancy is forecast to grow at a "solid" 3.6 per cent annual rate over the next five years, though held back by reduced public sector spend.

Research and development, 40 per cent dependent on the public sector, is set to grow just 1.9 per cent in 2011, but with growth picking up to 3.1 per cent for the period 2012 to 2015.

Howard Archer, an economist with IHS Global Insight, said: "I think IT will be one of the strongest performers. What investment there is will be in improving productivity rather than adding capacity. A lot of companies are cash-rich after seeing improving profitability last year and they will be looking to upgrade facilities such as IT."