Weak consumer spending hits services sector

BUSINESS volumes fell in the UK services sector in the past quarter at the fastest rate since November 2009, the CBI said today.

The CBI said firms involved in business and professional service saw volumes contract unexpectedly. Volumes of business in consumer services, such as hotels, bars and restaurants, also fell, and at the fastest rate since November 2009.

Richard Woolhouse, the CBI’s head of fiscal policy, said: “Activity has fallen across the services sector for the first time since November 2009.

“This quarter we’ve seen more evidence of the ongoing decline in consumer services spending, as people with increasingly squeezed household incomes are forced to cut back their discretionary spending.

“What is new, and was not expected this quarter, is that spending on business and professional services also fell, something not seen since November 2009.

“However, despite tough trading conditions, business and professional service firms have increased staff numbers, while employment in consumer services fell more slowly than expected.”

In both sectors, uncertainty about demand was the single biggest factor likely to limit capital expenditure (63% and 45% respectively), and expansion in the year ahead (91% and 78% respectively).

The August quarterly CBI Service Sector Survey was conducted between July 29 and August 17, and covered 162 firms.