Thriving trade in Britain’s hotels and restaurants is leading the way towards an economic recovery, according to the business lobby group the CBI.
Chancellor George Osborne has been under fire from the IMF
Its quarterly survey showed that hotels, restaurants and bars enjoyed their biggest increase in trade in almost six years. This boosted business confidence and the entire services sector, which also includes accountancy, marketing and legal firms, expects solid growth in activity and profitability in the next quarter.
A recovery in the wider services sector, which accounts for more than three quarters of the economy, helped Britain avoid a triple-dip recession at the start of the year.
The survey will provide some relief for the chancellor, George Osborne, who was last week urged by the International Monetary Fund (IMF) to review his plans for a £10bn tax-and-spending squeeze this year.
It is the latest in a series of promising economic indicators for Britain. This month the Bank of England increased its growth forecast and cut back its inflation forecast, the first time it has done so since 2007, prompting outgoing governor Sir Mervyn King to say that “recovery is in sight”.
An increase in consumer spending in the three months to May boosted profitability for the first time since November 2007, despite rising employment costs. CBI director of economics, Stephen Gifford said: “What’s promising is that consumer services have seen growth in activity, and expect this to continue pointing to a greater willingness from people to go out and spend.”
Activity in the business and professional services sector was generally flat over the quarter and profitability fell. However the companies surveyed had brighter expectations for the next quarter and optimism rose at its fastest rate in more than three years.
The CBI warned that the business climate remained challenging. Gifford said: “There is concern around getting access to finance, so it’s vital that growing firms look at the full range of funding options out there on the market. Conditions remain tricky, with consumers still grappling with a squeeze on real incomes, and business confidence vulnerable to any adverse developments in the global economy.”
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