UK services firms are still in the doldrums, CBI says

LONDON (Reuters) -British services businesses reported another fall in confidence and activity this month, according to a leading employers group which called on finance minister Rachel Reeves to refrain from adding to the corporate tax burden.

The Confederation of British Industry said optimism in August among firms in the consumer and business segments of the services sector was down by less than in May but was much weaker than this time last year.

Although cost pressures remained high, firms were unable to push up their own prices at the kind of pace seen in the previous two months, the CBI said.

The Bank of England is worried about inflation pressures among services firms. Earlier this month it hinted at a slowdown in the already gradual pace of interest rate cuts, even as the labour market weakens.

Alpesh Paleja, the CBI's deputy chief economist, said the survey painted a grim overall picture for services firms with the impact of higher costs and falling demand being seen in lower hiring, investment and profits.

"If the government is to achieve its long-term growth ambitions, it must start delivering the short-term certainty required to boost business confidence," Paleja said.

As well as a commitment to no further tax rises on business at the autumn budget, the government should rethink its plans to give more rights to workers which could lead to "unnecessary costs" for employers, he said.

Reeves is widely expected to increase taxes in her budget plan in order to remain on course to meet her target for fixing the public finances.

The CBI survey showed services firms expected business to weaken over the coming three months but less sharply than in previous quarters. Cost pressures were also expected to cool but remain strong by historical standards.

The survey was conducted between July 28 and August 14 with 396 firms taking part.

(Writing by William Schomberg; editing by David Milliken)