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UK service sector suffers in Q2

Disappointing business conditions have been reported in the UK services sector, according to a report from CBI.

Consumer, business and professional services each expected growth in the latest quarter, however figures released today show that activity in these sectors has fallen.

Businesses in consumer services said volumes and values fell at a consistent level from the previous quarter, while confidence plummeted by 23% compared with a 2% decrease 3 months ago.

CBI surveyed organisations in accountancy, law and marketing, hotels, restaurants, bars, as well as firms in travel and leisure.

Business value fell, as 12% of firms reported a slump, as well as 10% that also saw a decrease in volumes.

Although average selling prices did not increase, total costs per employee increased significantly with a 26% rise. CBI’s report said that combined with the decreases in volumes, this resulted in a decline in profitability.

Employment in the consumer services industries also fell by 8% and expenditure on training was significantly reduced by 16%.The outlook for the coming 3 months was not optimistic, and little change is expected to occur.

Businesses predicted continuity with current figures, and said that a further fall of 11% in volumes was expected, while value would drop more significantly by 17%.

Anna Leach, CBI Head of Economic Analysis, said:“Conditions in the service sector have not improved as expected this quarter, with firms now more negative about the overall business situation than they were three months ago.

“Companies selling services to consumers continue to face challenging times, with price-cost pressures and a weak business environment squeezing profits.

“While business and professional services firms are continuing to see business volumes fall, they have also seen labour costs stabilise, helping to support headcount.”

Investment in consumer services remained weak in the latest results, and future investment cannot be counted on to bolster the sector. Capital expenditure for the coming year is also low in comparison with long run averages and spending will be reduced.

However in business and professional services, expenditure in IT will increase by 10%, but will be balanced by reduced spending on buildings, land, vehicles, plant and machinery.

This was posted in Bdaily's Members' News section by Miranda Dobson .