SERVICE sector firms reported a surprise fall in sales today – resulting in lower profitability and business levels below normal.
Those were the main findings of a survey by the CBI covering firms operating in business and professional services, including accountancy, law and marketing; and consumer services, such as hotel and catering, leisure and travel.
Firms in business and professional services had expected the volume and value of business to strengthen following modest growth in the previous quarter.
Instead, both measures fell – contributing to a fall in profits for the sixth successive quarter rather than the expected modest rise in earnings.
Business volumes fell more sharply than expected for companies in consumer services – while business values dipped slightly.
That led to a further drop in profitability – but the rate of decline was the slowest since February, 2008.
Firms in consumer services are more optimistic than those in business and professional services – and expect to increase sales, profits and employment in the next three months..
Companies in business and professional service said conditions were set to stay challenging with a further decline in sales, profits and employment – albeit at a slower rate than during the past quarter.
Ian McCafferty, CBI chief economic adviser, said:
“Consumers and businesses are continuing to cut back spending on goods and services – and firms in the sector are responding by cutting prices to stay competitive.”