Service sector jobs warning

THE service sector is expected to be hit hard by job losses as the economic downturn deepens according to the CBI.

The latest Service Sector Survey by the CBI covers 195 companies operating in the service sector, across business and professional services, such as accountancy and legal firms, and consumer services, which include hotels, bars and restaurants, travel and leisure.

In the three months to November, firms reported steep falls in business volumes and profitability, as well as plans to scale back employment and investment.

Firms selling services to businesses saw the volume and value of their business, profitability and numbers employed fall at record rates – the steepest declines since the survey began in 1998.

Companies are also cutting investment plans sharply as worries about future demand intensifies.

Companies operating in consumer services saw profitability fall sharply for a third successive quarter.

Business volumes and values also fell strongly, after the previous quarter’s small gains.

A record number of firms cited the cost of finance as likely to limit capital expenditure in the next year. Although the workforce grew slightly for the first time in a year, businesses are predicting much larger cuts to their headcounts in the next quarter.

Ian McCafferty, the CBI’s chief economic adviser, said: “Recent economic data has highlighted just how rapidly the economy is weakening. With consumers continuing to tighten their belts, companies operating in consumer services, such as leisure and personal care, are continuing to find trading conditions very challenging.

“So far, job losses have been relatively small across the whole of the service sector, but with firms predicting faster falls in volumes, values and profitability in the next quarter, we can expect to see significant job losses in the coming months.”