Member Article

Service Sector sees conditions weaken

In the three months to February, business conditions weakened for the UK services sector according to the CBI.

The decline in activity was at a slower rate than the previous period in Consumer Services, but by less than expected for Business and Professional Firms. However, this decline is expected to get even slower over the next 3 months.

In the Consumer Services sector, -25% of firms said that businesses fell broadly in line with the expected figure of -23%. This represents a significantly less negative balance than the -41% which was reported in the last survey.

Costs per employee were broadly stable for the first time since August 2009 at -3%. While the sector witnessed an increase of selling prices to 9%, this was still lower than the 22% figure which analysts had anticipated.

Ian McCafferty, CBI Chief Economic Adviser, said: “Although volumes of business activity continued to worsen across the UK services sector in the past quarter compared with the previous quarter, there are some tentative signs that conditions may be levelling out.

“There’s been a slowdown in the rate of decline in business volumes for consumer services firms, and they expect this to continue in the coming three months.”

In the Business and Professional services sector, employee numbers grew by 10%, defying an expected decline of -11%. Many firms expect this trend to continue, anticipating a rise of 8% in the coming months.

Plans for capital spending in this area have also been lowered after a period of growth, with businesses planning to spend less than last year on land, buildings, vehicles plant and machinery. Plans for IT investment is at its lowest rate since August 2009.

Mr McCafferty continued: “Firms providing business and professional services have seen business activity deteriorate, but not to the extent they had anticipated, and they too are expecting a more modest decline in the coming quarter.

“Business confidence remains fragile, and will continue to be so given the continuing uncertainty in the Eurozone.

“However, there are some signs that after the very sharp fall in confidence at the height of the crisis last autumn, sentiment is stabilising.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .