According to the CBI, sentiment in the UK services industry is declining at the fastest rate in two years

Business sentiment in Britain's services sector is declining at its fastest pace in two years, partly due to tax increases introduced in Finance Minister Rachel Reeves' first budget on October 30, according to the Confederation of British Industry (CBI) on Thursday.

The decline was most pronounced in consumer services, where large employers face a £25 billion ($32 billion) increase in payroll taxes. However, sentiment also worsened among business and professional services firms, the CBI reported.

At the CBI's annual conference on Monday, Reeves assured businesses she would not implement similar tax hikes again, following criticism from the CBI's chief executive, who said the scale of the increases had caught businesses off guard.

The latest survey revealed that optimism among consumer services businesses fell to its lowest level since August 2022, with the index dropping to -55 in November from -19 in August. Business and professional services sentiment also declined, falling to -29 from +9. The index measures the difference between the percentage of businesses expressing optimism and those expressing pessimism.

CBI Deputy Chief Economist Alpesh Paleja attributed the drop in sentiment, weaker hiring intentions, and rising cost pressures partly to the upcoming increase in employer National Insurance Contributions.

Profitability among business and professional services firms experienced its sharpest drop since August 2020, while all types of services firms reported plans to reduce investment. Business investment in Britain is already low by international standards, contributing to the country's lower economic productivity compared to major peers.

The CBI findings align with other recent data, including last week's S&P Global Purchasing Managers' Index, which pointed to economic contraction for the first time in 13 months.

The CBI survey was conducted between October 29 and November 14, with responses from 441 firms.

Paraphrasing text from "Reuters" all rights reserved by the original author.