UK consumer services sector sentiment falls to lowest in over a year

• Consumer services optimism balance fell to -49 in May from -45 in February, while business services dropped sharply to -46 from -3, marking the lowest since November 2025
• Consumer services profitability declined at the fastest pace since August 2020 as costs outpaced firms' ability to raise prices
• Companies plan to cut capital spending across most categories due to uncertain demand and inadequate returns, with the Bank of England monitoring inflation risks from energy price surges caused by the Iran war

Summary: UK Consumer Services Sector Sentiment Falls to Lowest in Over a Year

UK consumer-facing services businesses reported their weakest sentiment since February 2025, according to a Confederation of British Industry (CBI) survey released May 28. The optimism balance in consumer services dropped to -49 in May from -45 in February, while business and professional services sentiment plummeted to -46 from -3 in February—its lowest since November 2025.

Key Findings:

• Consumer services firms experienced their sharpest profitability decline since August 2020, as costs rose faster than their ability to increase prices
• Companies are cutting headcount and scaling back investment in response to falling profits
• Firms plan to reduce capital spending across most categories due to uncertain demand and inadequate returns, with the exception of IT investment by business/professional services firms

Market Implications:

The CBI's Charlotte Dendy warned that with inflation expected to rise in coming months, consumer caution will likely intensify, further straining already weak demand. The Bank of England is closely monitoring prices and profit margins to assess whether surging energy prices from the Iran war will trigger persistent inflation.

The survey, conducted April 27-May 13, included 97 consumer services firms and 195 business/professional services firms. The deteriorating sentiment reflects broader economic pressures facing UK businesses, including energy price shocks and persistent cost inflation that cannot be fully passed to consumers. This could signal weaker consumer spending ahead and potential challenges for Bank of England monetary policy decisions.