Consumer services segment continues to struggle, says CBI survey

Consumer services segment continues to struggle, says CBI survey

	Published : Wed, 08 Mar 2006 10:10 By : Phil Bateman Print this Story

LONDON: The consumer services segment in the UK is continuing to struggle in both volume and value of business, according to findings in a new survey.

The Confederation of British Industry and Grant Thornton survey found that conditions worsened in the segment, especially businesses in leisure, personal care, hotels, bars and restaurant. It said the leisure and personal care industry was the hardest hit as consumers are postponing their spending.

Mark Byers, partner at Grant Thornton, said the overall increase in the cost of living, as a result of higher utility bills and petrol prices, is eating into the disposable income of the people and making consumers think twice about the services they choose to spend their hard-earned cash on.

The CBI said the increased retail spending during the Christmas season did not stick on and the sluggishness is spreading to other areas of economy, which were immune to such a situation previously, like consumer services.

Ian McCafferty, CBI's chief economic adviser, said higher household bills are impacting leisure and entertainment services.

There has been a 17 per cent increase in the number of consumer-facing firms reporting fall in their businesses, while profitability fell steepest since August 2003, optimism dropped to a three-year low, and companies cut staff numbers for the second quarter in a row, the survey found.

The survey, however, found that companies providing business and professional services are registering strong growth. Firms dealing in property, management and legal services are finding their volume and value of business growing at the fastest rate since the quarterly survey began in November 1998, the survey indicated. The level of profitability remained at a record high while confidence levels hit a peak not seen since May 2004.

Meanwhile, Nationwide building society came out with data showing that consumer confidence fell in February, with its index falling by four points to 94, its ninth drop in the past year. It said bad news on jobs and retail sales, plus rising fuel and energy prices affected consumers' confidence.

Nationwide's executive director Stuart Bernau said the prospect of weakening consumer spending "presented a challenge" to the Bank of England, whose Monetary Policy Committee is meeting now and to Gordon Brown, who is giving the final touches to his budget.

Market research company GfK too had found that sales of consumer durables suffered their first fall for at least a decade in February, while retail analysts Footfall said the number of visitors to shopping centres fell 0.2 per cent in the final week of February, taking the annual decline to 8 per cent.