Service sector firms are more optimistic about their business than they were three months ago despite a mixed outlook for the sector over the coming quarter, according to the latest CBI/Grant Thornton survey of the sector.

Levels of business in terms of value were ‘above normal’ for a record number of business and professional services firms and, for consumer firms, the balance was the highest for more than six years.

There is a contrasting outlook for the next three months. Companies that provide professional services, such as accountants and architects, expect the strongest growth in business volumes and values for three years, whilst those providing services to the consumer, such as restaurants, hotels and leisure companies, predict modest declines.

Costs continue to increase across services, though at a weaker rate for consumer firms, and services companies hope to increase prices in a bid to protect profit margins. A record balance of business and professional services intend to put up prices in the coming quarter.

Ian McCafferty, CBI chief economic adviser said: “The service sector has notched up another positive quarter although with much slower growth in profitability. Looking ahead, business and professional services firms expect even better performance over the next three months.

“However, the outlook is not so rosy for consumer services firms where the effect of higher interest rates may be beginning to bite. Though spending on big ticket services such as travel remains largely undented, falls in spending are now expected by hotels, bars and restaurants.”