LONDON (MNI) – The two main UK services subsectors continued on a
divergent path in the first quarter, with business and professional
services seeing business volumes rise but consumer services seeing
volumes fall, according to the latest Confederation of British Industry
Service Sector Survey.

This is the first quarter of “significant” growth that firms
selling business and professional services have seen since May 2008, the
CBI said.

But consumer services suffered a bad quarter, the CBI said. Of
those consumer services companies surveyed just 20% said the value of
business rose but 35% said it fell, giving a balance of -15%, which is
the fastest fall since May 2009 when the balance was -30%.

Volumes of consumer services business also fell with 24% of firms
reporting a rise and 34% recording drops – a rounded balance of -11%.

This is less negative than expected though – and firms expect
business volumes to be roughly flat in the coming quarter, the CBI said.

Consumer services firms’ average selling prices rose, but at a
slightly slower rate of 9%, down from the previous quarter when the
figure was 11%.

The CBI said that consumer services firms are forecasting a tough
quarter ahead with a balance of 15% of firms predicting a fall in
profitability.

The balance of firms reporting that costs per person rose continued
to increase, climbing to 23% following a 32% rise in the previous
quarter.

Turning to Business and Professional Services the survey showed the
value of business rose to 4%

Firms feel bullish about business values for the coming quarter,
with the balance of firms expecting an increase in values rising to +13%
– the highest level since August 2009.

Volumes also increased with the balance rising +8% – the highest
level since May 2008.

Commenting on the report, Ian McCafferty, CBI Chief Economic
Adviser, said:

“These findings on the service sector reveal much about the broader
economy. On the one hand, consumer spending is constrained, held back by
rising prices and squeezed real incomes. On the other, there are signs
that spending by businesses is picking up, helping to re-balance the
economy away from consumer-driven growth.”

“Business and professional services firms managed to grow their
business volumes modestly in the past three months, and in turn steadied
their profitability in the face of falling prices and rising costs.
Signs that firms plan to invest more in IT and equipment are
encouraging.”

–London Bureau; Tel: +442078627492; email: sanjukta.moorthy@ntkn.com

[TOPICS: M$B$$$,MABDS$]