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Businesses are taking on more people and optimism is at its highest level since 1998, according to the business lobby group, the CBI.
Its survey of 151 businesses said consumer and professional services were increasingly happy about the economic situation.
However, businesses were finding it hard to find staff with the right skills, the CBI said.
Skills gaps could constrain business growth over the coming year, it added.
Firms in the services sectors are taking on staff and increasing spending on training and technology.
Consumer services – including hotels, bars, restaurants, travel and leisure firms – saw levels of business that were “comfortably above normal”.
Professional services companies – including accountancy, legal and marketing firms – told the CBI that their business levels were above normal for the first time since November 2007.
Katja Hall, the CBI’s deputy director general, said: “With a full year of growth under their belts, service sector firms are more upbeat than they have been for a long time.
“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.”
Source: BBC News