Better news, but life still tough for service sector firms

THE slump in the services sector appears to be slowing down, a survey said today.

The CBI said that although business levels in the sector are still below normal, the picture is improved on the previous three quarters.

The organisation, which has 4,500 members in the North West, said firms were seeing downward pressure on profits and deflation in the sector.

The quarterly research, conducted between 29 July and 12 August, covered 184 companies in the sector.

They are divided into Business and Professional Services, such as accountancy, legal and marketing firms, and Consumer Services, including hotels, bars and restaurants, travel and leisure.

In Business and Professional Services, the value and volumes of business both rose very slightly on the previous quarter for the first time since May 2008, though both measures remain “below normal”, for the seventh consecutive quarter.

In Consumer Services, business values and volumes fell slightly, at much slower rates than in the previous three quarters.

Looking forward to the next three months, firms in Consumer Services expect business values to stabilise and volumes to decline marginally, and in Business and Professional Services, they are expected to rise, with more firms expecting rises than at any other point since November 2007.

However, the situation remains difficult, the CBI said. Profitability fell in both sub-sectors as prices fell sharply.

In Consumer Services, 32% of firms cut prices and just 11% increased them, giving a balance of -21%, the lowest since the survey began in 1998.

The balance for Business and Professional Services was lower still at -31%.
In both sub-sectors, firms expect prices to fall, but at slower rates, over the next three months.