UK services still shrinking

Some small hope for tech spending though

Business and professional services have had a flat quarter with business volume and prices broadly unchanged, while consumer services have seen an unexpected decline.

Consumer service companies were expecting modest growth in the quarter rather than a fall. Some 30 per cent of consumer firms said the value of business rose, but 38 per cent said it had fallen.

Volume of business fell for 41 per cent versus 23 per cent who saw a rise. The survey was carried out by the CBI between 27 October and 10 November.

For business and professional services value was down three per cent and volume up three per cent. Companies expect a four per cent fall in value in the next quarter and a seven per cent fall in volume.

29 per cent of business service firms said they'd seen prices fall in the quarter, and 13 per cent had seen a fall in profitability. Twenty per cent of companies expect a further fall in profitability in the next three months.

Ian McCafferty, chief economic adviser to the CBI, said the CBI survey of service companies showed sluggish demand was to blame for the bumpy recovery for the service sector. He said consumers were cutting back on spending while professional firms were being hit by falling prices, rising costs and less business.

McCafferty added that firms are less optimistic now than they were three months ago.

In terms of investment nine per cent more firms intend to invest in IT equipment than don't, and a balance of eight per cent of companies expect to increase employment.

Researchers spoke to 169 companies. ®