Service sector flat says CBI

The service sector has seen profitability falling at a record rate amongst consumer-facing companies according to the latest research by the Confederation of British Industry (CBI).

The latest CBI Services Sector survey revealed that business was also flat for business services firms. It has also found business volumes and values remaining weak for the sector as a whole.

Neither consumer nor business services firms are positive about expansion over the coming year and they have also become more concerned about their ability to raise external finance and the cost of doing so.-

However firms selling professional services to businesses, such as lawyers, accountants, architects, IT and recruitment firms saw their volumes and values of business grow in the last three months, but at rates markedly below those of 2007.

The CBI's chief economic adviser, Ian McCafferty, said that services sector firms are concerned about their business prospects.

He explained that consumers are reining in spending on leisure, entertainment and eating out, while professionals offering services such as accountancy, property and law have seen their profits flatten off as costs continue to grow strongly.

There are some exceptions, he added. Travel companies reported healthy demand for holidays in the past three months, with people more inclined to take a well-earned break as rising costs put greater demands on household spending. Meanwhile, marketing firms are going from strength to strength and the telecoms and IT sector has seen a run of strong profitability growth.