Service sector confidence continues to fall
Service sector confidence has continued to fall this month with increasing job losses and declining investment levels, according to a survey.
The Confederation of British Industry (CBI) highlighted in its quarterly survey of the service sector that confidence has been falling for a year.
The CBI and Grant Thornton found that among consumer services, business volumes fell at the fastest rate since May 2001.
The numbers of people employed in consumer services fell sharply this quarter, with more jobs lost last quarter than at any time since the survey began in November 1998. However, the CBI claimed that the rate of decline in jobs is expected to ease over the coming quarter.
The survey claims that the consumer services sector has failed to profit from the boom in consumer spending that has driven retail sales. Prices for consumer services fell at their fastest rate for almost two years leading to firms cutting investment in all areas.
Ian McCafferty, CBI chief economic adviser commented, ‘Consumer services firms have missed out on the consumer spending revival that retailers have enjoyed. Stubborn cost increases and falling business have led to job cuts that may render firms unable to respond swiftly if the pick-up materializes. But recovery remains no more than a hope, with little hard evidence suggesting a turnaround.’
The CBI revealed that the problems facing consumer services firms are not reflected among business and professional service firms, such as employment agencies and computer services.
Business and professional service firms saw confidence boosted by a rise in business volumes and profitability. Optimism levels are at their highest rate since May 2002 because of increasing business levels. Firms now expect the strongest growth in business volumes since May 2002.
However, not all business and professional service firms have seen increasing volumes. For example, marketing companies and road hauliers reported falling business volumes over the past three months.
Steve Edmonds, head of Grant Thornton’s Entrepreneurial Business Services, stated, ‘The service sector appears to be no closer to mounting a successful and sustainable recovery. Amongst consumer services firms, prospects remain bleak as businesses struggle to cope with overcapacity and a consumer spending revival seemingly passing them by. Amongst business and professional services firms, slight improvements in profitability levels amongst a handful of sectors merely offer a tantalising glimmer of hope for the future.’
