City of London
Britain's service sector accounts for around three quarters of GDPReuters

Firms in the UK's vast service sector have been taking on more staff as they ride the wave of economic recovery, though a skills shortage looms.

According to the Confederation of British Industry (CBI), 47% of the 151 service sector businesses surveyed said they had more staff on the books in May than a month before. That compares with just 12% who said employee numbers were down. Many reported intentions to hire more staff.

And optimism about business conditions struck a balance of +53% – the difference between those reporting improved sentiment and those saying the opposite – in the best reading since 1998.

It comes as the UK economic recovery strengthens, with 0.8% GDP growth in the first quarter of 2014, according to the Office for National Statistics (ONS). The Bank of England forecasts the UK economy to grow by around 3% in 2014.

Much of this will be driven by the service sector, which accounts for around three quarters of GDP.

"With a full year of growth under their belts, service sector firms are more upbeat than they have been for a long time," said Katja Hall, deputy director-general of the CBI.

"The recovery continues to strengthen with both consumer and business-facing firms taking on more staff and investing in training and IT.

"But a rising number of firms, particularly in business and professional services are having problems finding the right staff. This survey identifies a skills gap as a growing constraint on business expansion in the sector over the year ahead."

The CBI survey found that 33% of firms think the availability of professional staff – or lack thereof – is a problem for them.