UK Service Sector Profits Hit By Falling Sales, Survey Shows

Sponsored Links

Business levels in the British services sector was well below normal in the three months ended November, a survey conducted by the Confederation of British Industry showed on Monday.

The quarterly survey, conducted between October 28 and November 11, covering 179 service sector firms, found that the volume and value of businesses fell against expectations. The decline in business volumes, coupled with another intense price reduction, meant the modest growth in overall profitability that had been anticipated, failed to materialize. Around 48% of firms surveyed reported a fall in profits, while 21% of firms said profits increased, giving a balance of minus 27%.

In consumer services, the volume of business declined more sharply than the last quarter and by more than expected, while business values dipped slightly. Around 34% of consumer services firms reported falling profits, while 21% registered increased profitability, a balance of minus 13%.

"The recent weakness in the service sector is disappointing, particularly as business and professional firms had hoped conditions would strengthen this quarter," said Ian McCafferty, Chief Economic Adviser at CBI. "Consumers and businesses are continuing to cut back on spending on goods and services, and firms operating in the sector are responding by cutting prices to stay competitive."

The CBI's forward-looking indicator revealed that consumer services firms are more optimistic than those in business and professional services. Optimism about the business situation among consumer services companies rose at its fastest rate since February 2007, with a net 16% of firms expecting an improved situation.

However, conditions look set to remain challenging for the business and professional services sectors. In the coming quarter, sales, profits and employment are expected to decline again, albeit at a slower pace. Factors blamed include low demand and sales, while the inability to raise funds was also a concern.

Further, the survey showed that service sector firms are continuing to cut prices for services, with a net 35% of business and professional services reporting reduced prices, while a net 4% of consumer service companies indicated a fall in average selling prices.

Business levels in the British services sector was well below normal in the three months ended November, a survey conducted by the Confederation of British Industries showed on Monday. (Market News Provided by RTTNews)