Services Sector Concerned about Prospects, Says CBI; Only Travel, Marketing and IT Escape Gloomy Forecast
Byline: Aled Blake
SERVICES sector sentiment further deteriorated in the last quarter as profitability fell at a record rate for consumer-facing companies, according to latest CBI research published today.
Its services sector survey also found that profitability was flat for business services firms, compounding pessimism in the sector.
Levels of business volumes and values remained weak for the sector as a whole, and neither consumer nor business services firms are positive about business expansion over the coming year.
They have also become more concerned about their ability to raise external finance and the cost of doing so.
Consumer services firms, such as hotels, bars and restaurants, cinemas and gyms, endured an even worse quarter than they had feared. Business volumes and values fell at rates not seen since the end of 2001.
At the same time, costs accelerated rapidly and profitability sank at a record rate. Firms selling professional services to businesses, such as lawyers, accountants, architects, IT and recruitment firms saw their volumes and values of business grow in the last three months, but at rates markedly below those of 2007.
Average selling prices fell in what is a highly competitive sector and profitability was flat.
Numbers employed by consumer services firms fell for the second quarter running, but this should be short-lived as firms plan modest job increases next quarter.
Job numbers rose in business and professional services firms and are expected to continue doing so, albeit at a slower rate according to the research.
In the sub-sectors, the only consumer services sector to report growth in business volumes over in the past three months was travel services.
However, these firms incurred rapid cost rises and, with limited ability to pass these onto customers, their profitability fell at the fastest rate for five years.
Demand for leisure and personal care services - such as gyms, hairdressers or cinemas - fell markedly in the last quarter, as didspending in hotels, bars and restaurants.
Profitability of hospitality firms fell at a record rate and numbers employed have fallen for two quarters in a row.
Firms transporting goods and post saw volumes and values of business fall faster than they have since just after the survey began in 1998, with profitability the weakest for eight years and numbers employed decreasing fast. …