Service sector demand down

06-12-2007

Service sector demand down
Consumer services firms have experienced a "marked slowdown" in demand over the past three months, new research has found.

Cinemas, gyms and hairdressers were among those most affected by the fall, according to the latest poll of the service sector conducted by the Confederation of British Industry (CBI) and accounting firm Grant Thornton.

Researchers said consumer spending across such businesses fell at the fastest rate in the survey's ten year history over the last quarter – with the drop apparently linked to the economic impact of the ongoing global credit crunch.

Enterprises providing professional services to business - such as telecoms firms, IT consultancies, architects and recruitment agencies - fared better, reporting volume growth in line with expectations.

Commenting on the results of the poll of 119 service sector firms, CBI chief economic adviser Ian McCafferty said: "Demand for services has eased over the past three months with signs that firms serving the consumer are finding life increasingly difficult.

"Although there is little sign the credit crunch is having the same effect on business services companies, these firms' expectations for the coming months are unspectacular."

Despite weakening demand in the industry, companies across the services sector plan to spend more on training and to invest more money in their operations over the coming year.

Consumer-facing firms are also hopeful demand will pick-up over the key Christmas trading period, the survey reports.

But in a sign inflationary pressures remain a potential problem for the Bank of England, the poll found such businesses expect to have greater pricing power over the coming quarter.

Commenting ahead of the Bank's interest rate decision, due at midday, Mr McCafferty added: "The Bank of England faces a very difficult judgement today, balancing the signs of slowing business growth and deteriorating consumer confidence with concerns about inflationary pressure."

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