The strength of the boom in service activities early this year was confirmed yesterday by official numbers for the profitability of British companies.
National Statistics said service sector companies delivered returns equivalent to 17.5 per cent in the first quarter of 2005, a rate last bettered five years earlier in the short-lived Millennium euphoria and equalled only once since, in late 2002.
Manufacturing companies, by contrast, saw their profitability squeezed by high oil and metal prices, falling back to 6.6 per cent, from 7.7 per cent in the final months of last year.
That was lower than at any time since the depressed first quarter of 2003.
All these returns were dwarfed by returns of 29.6 per cent achieved by companies working mainly in the oil and gas industries on the UK continental shelf, reflecting the surge in oil prices which hit manufacturers as Brent crude broke through the $55 a barrel barrier.
It was an improvement on
27.6 per cent in the fourth quarter of last year, but still appreciably short of a recent peak of 35.4 per cent touched in late 2002.
Overall, non- financial British companies made a net rate of return of 13.3 per cent in the first quarter of 2005, up from 13.1 per cent in the final quarter of 2005 and 13.3 per cent in the same months a year earlier.
Roger Bootle, economic adviser to Deloitte, commented that the rise in profitability in services was in line with other evidence suggesting the service economy had stayed fairly resilient.
But he warned that this resilience is unlikely to last and that profits growth is "clearly vulnerable to a further tightening of purse strings by consumers".
"The marginal rise in profitability in the first quarter does little to alleviate our concerns about the tough times facing the UK corporate sector," Mr Bootle added.