UK consumer services companies suffered their biggest fall in activity in the last quarter for two and a half years, further fuelling fears of a double-dip recession for the economy amid the eurozone debt crisis.
The Confederation of British Industry (CBI) also said that levels of activity in the business and professional services sectors also fell over the three months to 16 November, albeit at a less severe rate than expected.
But for consumer services companies – covering hotels, bars, restaurants, travel and leisure firms – the ongoing decline in the value, and volume, of business conducted "intensified" in the last quarter to November, with the figures massively down on expectations.
Combined with gloomy recent data from the UK retail sector, the CBI's latest figures lay bare the painful squeeze on household budgets that is leading a sharp cutback on discretionary spending.
A negative net balance of 41 per cent of firms said volumes of activity fell in the last quarter, which compared with expectations of a 1 per cent fall and represented the worst figures since May 2009. Despite average selling prices rising, the value of business conducted in the consumer services sector makes for equally depressing reading, with a net balance of 40 per cent reporting a fall.
Ian McCafferty, the CBI's chief economic adviser, said: "Business conditions are worsening across the UK services sector, and consumer services firms in particular have been hit unexpectedly hard."
On another measure, a net balance of minus 55 per cent said the volume of activity in the last quarter was "below normal" for this period, while on a value basis the figure was negative 53 per cent.
Consumer services firms said they expect the value and volume of business to fall again in the next quarter by 23 per cent and 17 per cent, respectively.