Insight 43 - Magazine - Page 40
SERVICE SECTOR STRUGGLES WITH FALLING
ACTIVITY AND RISING COST PRESSURES CBI SERVICE SECTOR SURVEY - FEB 2025
S
entiment across the services sector
deteriorated again in the quarter
to February, according to the latest
Service Sector Survey.
Business volumes also fell faster for
the fourth consecutive rolling quarter.
In particular, consumer services saw a
heavy fall in volumes, alongside a more
tempered, but still significant, decline in
business & professional services.
Furthermore, pressures on costs and
prices have continued to build in the
quarter to February, with prices seeing a
firmer increase compared to the second
half of 2024. Consumer services recorded
a particularly big jump in price inflation
compared to the previous quarter, where
it is now at its highest since May 2023. In
contrast, business & professional services
saw a more modest rise in prices in the
quarter to February, in line with the pace
40
of inflation seen over the past year.
With business volumes falling, cost
pressures picking up and margins
remaining depressed, profitability
continued to fall sharply across the
services sector. Services firms also
reported another decline in headcount,
albeit at a slower pace than in the
previous rolling quarter.
Looking ahead, firms across the services
sector expect to see business volumes
decline again in the quarter ahead, albeit
at a somewhat slower pace. This is driven
primarily by business & professional
services, which expects the decline to
slow compared to the previous quarter.
However, consumer services firms
anticipate volumes to deteriorate at a
similarly heavy pace.
Alongside weak prospects for activity,
expectations are for cost inflation to pick
bIZ4BIZ INSIGHT MAGAZINE | APRIL 2025
up further during the next three months
- if realised, this would mark a return to
historically high costs growth across the
sector. While selling price inflation is also
expected to accelerate, it is still set to
run behind the predicted rise in costs.
With activity still weak, services firms are
being selective about their investment
plans over the year ahead. Across
the sector, firms expect to cut back
significantly on capital spending across
the board, with investment plans for
land & buildings and vehicles, plant &
machinery now at their weakest since
the Covid-19 pandemic. The notable
exception is IT spending among business
& professional services firms, which
is anticipated to increase in the year
ahead.
The survey based on the responses of
517 services firms found that:
