Pressure of rising costs in UK leads to decline in consumer services
Rising costs caused profitability to decline in the services sector, according to according to the new research from the Confederation of British Industry (CBI).
Consumer services – which include hotels, bars, restaurants, travel and leisure – saw growth in volumes slow, while demand was flat during the three months to May. Meanwhile, costs rose at their fastest rate since August 2008.
The costs for businesses per person employed grew by 60% between March and May, up from 32% in the previous quarter.
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The report underlines this is the highest level of growth in the almost nine years and warns it is expected costs will continue to rise in the coming three months. Volumes of business are expected to fall at their steepest rate since August 2012.
Commenting on the figures, CBI chief economist Rain Newton-Smith said the decline in demand was due to the increased pressure on personal finances.
“Rising inflation is squeezing household incomes, which is hitting demand in the consumer services sector,” he said.
“At the same time, cost pressures are building across the board, painting a difficult picture for services firms.”
Despite these pressures, services firms expect to hire more workers and to continue to invest.
Investment among consumer services firms will be increasingly driven by the need to replace old equipment and improve efficiency.
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