Tougher climate 'spreads to business services'

Tough trading conditions in the consumer services sector have spread to business and professional services, a CBI survey has found.

In its quarterly Services Sector survey, the proportion of business and professional service firms reporting declines in both the amount and value of trade increased faster than at any time since the survey began in 1998.

For the first time in four years, employment levels fell, while confidence declined for the third quarter in a row.

There was more positive news from hotels, bars and restaurants, where trade expanded strongly and employment levels appeared to hold up. However, profitability and confidence in the sector continued their recent declines.

"Profitability in the service sector is clearly under pressure," said Ian McCafferty, chief economic adviser at the CBI. "This pressure, initially confined mainly to consumer services such as hospitality and travel, has now spread to the professional and business services sector, covering areas such as marketing and legal services.

"This reflects much tougher trading conditions for business and professional firms, after a period when business trends had been holding up in the face of the slowing economy."