Cost pressures are building for services firms “painting a difficult picture”, according to the latest CBI survey.
Business and professional services volumes are expected to pick in the next three months, but the consumer services sector is anticipating a fall at the fastest pace since August 2012.
Over the last three months 22 per cent of professional services firms reported business volumes were up compared with the previous quarter, but 25 per cent said they were down. In consumer services 31 per cent. reported a rise in business volumes, compared with 19 per cent saying they were down in the last three months. However, volumes are expected to fall in the next quarter.
Twenty four per cent of professional services firms said the overall profitability of business was up on the previous quarter, but 30 per cent said it was down.
Profitability declined for the fifth consecutive quarter in May in consumer services, and is expected to fall again next quarter.
In the consumer sector costs surged at their fastest pace since August 2008 while expectations for the three months ahead are at their highest level since August 2006.
CBI chief economist Rain Newton-Smith says: “Rising inflation is squeezing household incomes, which is hitting demand in the consumer services sector. At the same time, cost pressures are building across the board, painting a difficult picture for services firms.”
However, Newton-Smith says services expect to hire more workers and to continue to invest despite these pressures.
“Firms in business and professional services cut back on employment over the last quarter, but expect to increase headcount over the next three months. While employment growth slowed in consumer services, firms are expecting a slight pick-up next quarter.”