Slump in activity adds to double-dip recession fears

Consumer services companies suffered their biggest fall in activity for two and a half years in the past quarter, fuelling fears of a double-dip recession for the UK economy amid the eurozone debt crisis.

The Confederation of British Industry (CBI) also said activity in the business and professional services sectors also fell over the three months to November, albeit at a slower rate than expected.

For consumer services companies – including hotels, bars, restaurants, travel and leisure – the ongoing decline in the value and volume of business conducted "intensified" in the quarter to 16 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 companies said trading volumes fell in the past quarter, against expectations of a 1 per cent fall and representing the worst figures since May 2009.

Despite average selling prices rising, the value of business conducted in the sector makes for equally depressing reading, with a net balance of 40 per cent reporting a fall in the quarter.

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."

A net balance of minus 55 per cent said the volume of activity in the past quarter was "below normal" for the period.