Consumer Services Hit Hard by Spending Slowdown, says CBI
Businesses in the consumer-services sector have been hit hard by the economic slowdown, with sales falling to their lowest level in seven years, according to the Confederation of British Industry (CBI).
The CBI Services Sector survey identified the hospitality industry, leisure industry and personal services industry as having been particularly affected by the tough trading conditions.
The research revealed that a slowdown in consumer spending has resulted in the sales volumes of consumer-services firms such as hotels, bars, restaurants and cinemas falling to levels not seen since 2001.
Costs have also increased for firms in the sector, causing profitability to fall to the lowest level since the CBI survey began in 1998.
“Service sector firms are concerned about their prospects,” said CBI chief economic adviser Ian McCafferty. “Consumers are reining in spending on leisure, entertainment and eating out.”
The British Beer and Pub Association (BBPA) advised businesses in its sector to concentrate on attracting new customers to combat current economic difficulties.
“Like other sectors, we have been hit hard by rising costs, particularly in transporting products and commodity costs, which affect the price of beer,” said BBPA communications director Neil Williams.
“Firms can attract new customers by providing cover to enable people to smoke outside, looking closely at their menus, which are becoming vital for pubs, and responding carefully to customer needs,” he added. “Some pubs are being more innovative by opening in the morning and introducing coffee and broadband internet access.
“We are concerned by the present trend in pub closures, which is likely to continue for a while,” said Williams. “ It is undoubtedly a very difficult time for the service sector.”
The British Hospitality Association (BHA) urged businesses in the hospitality industry to introduce cost-saving measures.
“Hoteliers can fight it, either by reducing costs or increasing business in some way,” said BHA spokesperson Miles Quest. “Most hotels have introduced some energy saving measures, as energy costs have increased significantly as a proportion of expenditure.
“They need to cut back on other costs as much as they can, perhaps by changing the menus to offer less expensive ingredients,” he added. “I don’t think people are going to give up going on holiday or eating out quite so easily as people think they may do – they may just go out less or eat out less expensively.”