More pain for the services sector

The CBI reported the services sector’s fastest decline in business volumes since November 2009 and said pressure on household budgets had resulted in more poor trading in consumer-focused areas such as bars and restaurants.

“What is new, and was not expected this quarter, is that spending on business and professional services also fell, something not seen since November 2009,” the CBI’s head of fiscal policy Richard Woolhouse said.

In business and professional services, firms reported the first fall in volumes and the fastest fall in value of business in nearly two years, countering previous expectations that the quarter would show growth.

Firms in the sector are hopeful of a slower rate of decline in the coming three months but expectations for both volumes and profitability heading into the autumn are still the weakest since early 2009.

In consumer services, which also covers the travel and leisure industry, the ongoing decline in trading conditions intensified, with the balance of those firms recording lower-than-expected volumes at a near two-year high.

Expectations are that the volume of business will be flat in the current quarter and that the value of business will increase slightly.

Despite the tough conditions, employment fell more slowly than expected.