Member Article

Consumer services see strongest growth in 5 years

Business volumes in consumer services have risen at their fastest rate since August 2007 in the last three months.

These figures, released by CBI on Tuesday, include hotels, bars, restaurants, travel and leisure industries.

Profitability in this sector also rose for the first time since November 2007, despite employee costs continuing to increase.

However, CBI said concerns are rising in consumer services over a shortage of internal finance and an inability to find external finance.

CBI’s quarterly Service Sector Survey showed overall activity is on the rise along with confidence among business over the past three months.

The survey said business activity improved in the three months up to May, and despite business and professional services growing weaker than expected, consumer services saw a rapid turnaround in business volumes.

Business and professional services, which includes accountancy, legal and marketing firms, saw activity stay relatively flat, and whilst profitability fell overall, optimism grew at its fastest rate since February 2010.

Expectations were revealed from the 170 respondents that showed companies predict a firm quarter ahead.

Business and professional services anticipate strong growth in value and volumes, while consumer services firms predict growth will be sustained and profits and both sectors are expected to rise strongly.

Stephen Gifford, CBI director of economics, said: “There appears to be a sense of growing confidence in the service sector. We’ve seen some turnaround in activity this quarter, and a more positive outlook for the next.

“While activity has been pretty flat for business and professional firms, the outlook is much stronger.

“What’s promising is that consumer services have seen growth in activity, and expect this to continue pointing to a greater willingness from people to go out and spend.

“But there is concern around getting access to finance, so it’s vital that growing firms look at the full range of funding options out there on the market.

“Conditions remain tricky, with consumers still grappling with a squeeze on real incomes, and business confidence vulnerable to any adverse developments in the global economy.”

This was posted in Bdaily's Members' News section by Miranda Dobson .