By Jonathan Davies

The UK’s service sector showed strong growth in the three months to May, though concerns are increasing about the availability of skills and labour, according to the latest quarterly CBI Service Sector Survey.

Business volumes leapt in the business and professional services sector (which includes accountancy, legal and marketing firms) at the fastest rate in almost a decade, resulting in profits growing at their quickest pace since late 2007.

Growth in consumer services' (which includes hotels, bars, restaurants, travel and leisure firms) business volumes was more moderate, but stronger price growth helped support margins. Expectations for the next three months are robust across the entire service sector.

The survey of 174 firms showed a strong performance overall across the services sector, with optimism improving, recruitment up and investment intentions for the year ahead remaining solid.

However, an above-average number of firms reported labour availability as a constraint on investment, while skills shortages are increasingly affecting business expansion plans in business and professional services.

Rain Newton-Smith, CBI Director for Economics, said: “Strong confidence and activity in the services sector reinforces our view that weaker growth over the first quarter of 2015 will prove temporary.

“Prospects for consumer services remain buoyant, as real incomes rise supported by low inflation and strong employment, fuelling spending in bars, hotels and restaurants. But concerns about skills shortages are increasing in both sectors, particularly among business and professional services firms looking to expand.

“Nevertheless, capital spending plans are firm across the sectors, especially in consumer services, where companies are focussing on developing market share by reaching new customers and providing more services.”