Services firms had three months to forget between December and February, according to the latest survey by the CBI.
The quarterly survey of 147 firms – covering management consultants, hotels, catering, transport and telecoms businesses – showed that sales and volumes both fell over the period, confounding the hopes of companies that they would experience a pick-up in activity.
Profitability in professional services firms and consumer services firms were both hit by weak sales and higher employee costs. Business volumes fell in five of the nine sectors, with only three witnessing growth in business. Profitability decreased in seven of the nine sectors, with telecoms and computing suffering the largest decline. By contrast, hotels, bars and restaurants saw their profitability rise.
"Economic conditions remain fragile in the service sector," said Anna Leach of the CBI. But she also pointed out that many firms expect higher business volumes over the next three months. The proportion of consumer services firms expecting to expand over the next year is at its highest level since February 2010.
"Despite the disappointing quarter, optimism remained stable and the outlook is brighter for the months ahead," she said.