Consumer services firms hit by shock fall

CONSUMER services firms were hit with a "surprise" fall in demand and expect spending to weaken further over the coming months after a slump in business in the last quarter. Confidence in the sector has been rocked by a bigger than expected decline in growth over the last three months, according to the latest quarterly survey of the service sector by the CBI.

The report found that both the value and volume of business fell over the quarter, with 30 per cent of businesses reporting a rise in value but 38 per cent seeing a drop. Less than a quarter of firms said business volumes had increased, while more than four in ten said they had fallen.

The survey, which had been expected to show modest growth, cast a cloud over the outlook for the next quarter. More consumer services firms believe business values and volumes will contract further in the next three months than expect an improvement.

Ian McCafferty, chief economic adviser to the CBI, said the recovery of the service sector was being hindered by sluggish demand.

"Consumers are cutting back on leisure activities and other discretionary spending, which led to a surprise fall in business volumes and flat profits this quarter.

"Uncertainty about demand remains a real concern across the sector, and this is reflected in the fact that firms are feeling less optimistic about the business situation than three months ago."

Values and volumes in the business and professional services sector were flat in the last quarter.