SERVICE SECTOR STRUGGLES WITH FALLINGACTIVITY AND RISING COST PRESSURES CBI SERVICE SECTOR SURVEY - FEB 2025Sentiment across the services sectordeteriorated again in the quarterto February, according to the latestService Sector Survey.Business volumes also fell faster forthe fourth consecutive rolling quarter.In particular, consumer services saw aheavy fall in volumes, alongside a moretempered, but still significant, decline inbusiness & professional services.Furthermore, pressures on costs andprices have continued to build in thequarter to February, with prices seeing afirmer increase compared to the secondhalf of 2024. Consumer services recordeda particularly big jump in price inflationcompared to the previous quarter, whereit is now at its highest since May 2023. Incontrast, business & professional servicessaw a more modest rise in prices in thequarter to February, in line with the pace40of inflation seen over the past year.With business volumes falling, costpressures picking up and marginsremaining depressed, profitabilitycontinued to fall sharply across theservices sector. Services firms alsoreported another decline in headcount,albeit at a slower pace than in theprevious rolling quarter.Looking ahead, firms across the servicessector expect to see business volumesdecline again in the quarter ahead, albeitat a somewhat slower pace. This is drivenprimarily by business & professionalservices, which expects the decline toslow compared to the previous quarter.However, consumer services firmsanticipate volumes to deteriorate at asimilarly heavy pace.Alongside weak prospects for activity,expectations are for cost inflation to pickbIZ4BIZ INSIGHT MAGAZINE | APRIL 2025up further during the next three months- if realised, this would mark a return tohistorically high costs growth across thesector. While selling price inflation is alsoexpected to accelerate, it is still set torun behind the predicted rise in costs.With activity still weak, services firms arebeing selective about their investmentplans over the year ahead. Acrossthe sector, firms expect to cut backsignificantly on capital spending acrossthe board, with investment plans forland & buildings and vehicles, plant &machinery now at their weakest sincethe Covid-19 pandemic. The notableexception is IT spending among business& professional services firms, whichis anticipated to increase in the yearahead.The survey based on the responses of517 services firms found that:
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