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Services Sector Confidence Plunges as Costs Soar, Demand Falls
27 Aug
Summary
- Services firms report drop in confidence and activity
- Cost pressures remain high, but firms unable to raise prices
- CBI calls on government to avoid further tax hikes on businesses
According to a recent survey by the Confederation of British Industry (CBI), British services businesses are experiencing a significant decline in confidence and activity as of August 2025. The CBI's deputy chief economist, Alpesh Paleja, stated that the survey paints a "grim overall picture" for the sector, with the impact of higher costs and falling demand being seen in lower hiring, investment, and profits.
Despite the ongoing cost pressures, firms have been unable to pass on these increases to consumers by raising their own prices at the same pace as in the previous two months. This has further squeezed profit margins and contributed to the overall decline in business confidence.
The CBI has called on the government, led by Finance Minister Rachel Reeves, to refrain from adding to the corporate tax burden in the upcoming autumn budget. The group argues that if the government is to achieve its long-term growth ambitions, it must provide the "short-term certainty required to boost business confidence."
The survey also showed that services firms expect business to weaken further over the next three months, although the decline is expected to be less severe than in previous quarters. Cost pressures are also anticipated to cool, but they are expected to remain strong by historical standards.
