Consumer services business volumes are falling at their fastest rate for five and a half years, according to Confederation of British Industry (CBI).
While firms hiked prices at the fastest pace since May 2008, the volume collapse in the three months to November – the most severe since February 2012 – meant consumer services profitability declined for the seventh straight quarter.
“It’s no surprise that consumer services firms are having a tough time, as people feel the pinch in their pockets from higher inflation," said CBI head of economic intelligence Anna Leach.
"While weaker demand appears to have hit employment in consumer services last quarter, firms are looking to resume hiring next quarter as demand stabilises."
Business and professional services firms – which include accountancy, legal and marketing firms – reported that business volumes were stable, but volumes are expected to fall slightly in the three months to February.
Conditions for business and professional services also remain tough, and signs that firms are pulling back on their investment plans for the year ahead are concerning. Now is the time for the government to make significant progress in the EU negotiations and agree transitional arrangements by the end of the year.
Sentiment across the whole services sector remains mixed, the CBI said. Optimism among business and professional services firms improved slightly compared with three months earlier – the majority of firms expect to expand their business over the year ahead.
However, consumer services firms pessimism increased over the last three months, with the prospects for business expansion in the year ahead also deteriorating.