All-important service sector falters, says CBI

(Bloomberg)

Anxieties about Britain's faltering economic recovery will be heightened today by new data revealing that improvements in the key services sector appear to have stalled over the past quarter. The Confederation of British Industry's (CBI) latest snapshot of the dominant part of the economy is published on the day the Chancellor delivers his autumn statement and the Office for Budget Responsibility gives its latest forecasts for UK GDP growth.

The CBI's quarterly services surveys divide the sector into two halves: business and professional services, which includes firms offering accountancy, legal work and marketing; and consumer services, covering industries such as hotels, bars and restaurants, travel and leisure. The employers' organisation warned that the former had seen little or no improvement in business over the past three months, while firms in the latter reported a decline in performance.

The CBI said 30 per cent of consumer services businesses had seen the value of their work rise over the three months to the middle of November, while 38 per cent had seen a fall, a negative balance of 8 per cent. On business volumes, just 23 per cent reported a rise, compared with a 41 per cent fall, a negative balance of 18 per cent. On both measures, consumer services businesses expect to see further declines over the next three months.

The data from the business and professional services industry was slightly better, with slightly more firms reporting higher-value business over the past three months than lower-, but slightly fewer firms seeing higher volumes. But business and professional services companies expect declines over the next quarter. Ian McCafferty, the CBI's chief economic adviser, warned that the data underlined the "bumpy" nature of the recovery of the services sector and the wider economy.

"Consumers are cutting back on leisure activities and other discretionary spending, which led to a surprise fall in business volumes and flat profits this quarter," he said in a sober assessment of the sector's prospects.