Significant growth for firms selling business services

While business volumes in consumer services fell, firms selling business and professional services had their first quarter of significant growth in nearly three years.

The latest quarterly CBI Service Sector Survey, which was conducted between January 31 and February 16, covered 171 firms.

In consumer services, the value and volume of business continued to fall, marking a full year of decline. Of those surveyed, 20 per said the value rose and 35 per cent said it fell, giving a balance of -15 per cent, the fastest fall since May 2009.

Looking at the volume of business, 24 per cent reported a rise, and 34 per cent a drop, giving a rounded balance of -11 per cent. According to the CBI, this was less negative than anticipated and firms expect business volumes to be flat in the coming quarter.

In business and professional services, the value and volume of business rose, at balances of +4 per cent and +8 per cent respectively. The rise in business volumes, though modest, was the fastest since May 2008.

Ian McCafferty, CBI chief economic adviser, said: “These findings on the service sector reveal much about the broader economy. On the one hand, consumer spending is constrained, held back by rising prices and squeezed real incomes. On the other, there are signs that spending by businesses is picking up, helping to re-balance the economy away from consumer-driven growth.

“For the past year, consumers have been cutting back on leisure activities and other discretionary spending, with no indication of improvement any time soon.

“Business and professional services firms managed to grow their business volumes modestly in the past three months, and, in turn, steadied their profitability in the face of falling prices and rising costs. Signs that firms plan to invest more in IT and equipment are encouraging.”