Customer services sector recovering

Nia Williams

March 1, 2010

However, the situation differed between the Consumer Services sub-sector, where there was a slight improvement in business, and the Business and Professional Services sub-sector where conditions were more difficult.

The quarterly research, conducted between 27 January and 10 February, covered 180 service sector firms. 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 Consumer Services, the value and volume of business both rose slightly. Over the last three months, the balance for value of business was +10%, the highest since November 2007, and for volume of business was +7%, the highest since August 2007. Overall profitability was little changed, with a balance of -2% as costs rose, though this figure was the most encouraging since November 2007, when it was +27%.

There were rises in selling prices in Consumer Services, but these were probably caused in large part by the increase in VAT at the start of the year. 38% of companies said prices rose, and 8% said they fell, giving a balance of +30%, the highest since May 2008. Prices are expected to rise further over the next three months by a balance of +37% of companies.

In Business and Professional Services, the value and volume of business were little changed on the previous three months, which was better than companies expected. 24% of companies said the value of business rose, while 26% said it fell, giving a balance of -2%. For volume of business, 29% it rose, and 30% said it fell giving a balance of -1%.

However, prices, and therefore profitability, fell in the sub-sector. The balance for average selling prices was -21% over the past three months, and for overall profitability was -13%.

Companies appear to be cutting back on staffing numbers. In Consumer Services, employment fell compared with the previous three months, with a balance of -28%. In Business and Professional Services the figure was -25%.

Ian McCafferty, CBI chief economic adviser, said: “The survey shows that business activity has stabilised across the service sector, however the fortunes of the Consumer Services and the Business and Professional Services differ, with firms selling to households doing slightly better over the past three months. Prices in the Business and Professional Services sub-sector have continued to fall, reducing profits, and making conditions tougher.

“Overall, these figures are consistent with our view that the economy is recovering slowly, but that we will have to wait a while before growth picks up.”

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