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Hospitality sector being hit as economic crisis gathers pace; Business plummets at bars, hotels and restaurants.

Byline: Aled Blake Business Correspondent

JOB losses in hotels, bars, restaurants and other service sector firms are expected to accelerate as the economic downturn deepens, according to the CBI's latest Service Sector Survey.

The quarterly survey, published today, shows that in the three months to November, firms reported steep falls in business volumes and profitability, as well as plans to scale back employment and investment.

Companies selling services to businesses saw the volume and value of their business, profitability and numbers employed fall at record rates - the steepest declines since the survey began in 1998.

Firms are also cutting investment plans sharply as worries about future demand intensified.

Companies operating in consumer services saw profitability fall sharply for a third successive quarter. Business volumes and values also fell strongly, after the previous quarter's small gains.

A record number of firms cited the cost of finance as likely to limit capital expenditure in the next year. Although the workforce grew slightly for the first time in a year, businesses are predicting much larger cuts to their headcounts in the next quarter.

Ian McCafferty, the CBI's chief economic adviser, said: "Recent economic data has highlighted just how rapidly the economy is weakening.

With consumers continuing to tighten their belts, companies operating in consumer services, such as leisure and personal care, are continuing to find trading conditions very challenging.

"With a record number of consumer services companies worried about the cost of credit, we need to see lending conditions improve as a matter of urgency.

"As the recession deepens, firms are reducing businessto- business spending at a sharper rate, and as a result the decline in volumes and profits in business and professional services is expected to accelerate over the months ahead.

"So far, job losses have been relatively small across the whole of the service sector, but with firms predicting faster falls in volumes, values and profitability in the next quarter, we can expect to see significant job losses in the coming months."

In consumer industry sub-sectors, travel services firms experienced a second successive quarter of falling sales and employment, with both expected to intensify in the coming quarter.

Although costs per employee stabilised and selling prices rose during the quarter, this was offset by a sharp fall in the volume of business, which pushed overall profitability down for a third successive quarter.

The volume and value of business at hotels, bars and restaurants was almost flat in the three months to November.

Profitability fell for a fourth successive quarter but not as sharply as earlier this year. Employment grew strongly for the first time in a year.

But the picture is expected to worsen considerably in the next quarter with firms predicting faster declines in volumes, values and profits, as well as a reduction in employment.

In the leisure and personal care sub-sector, the number of people employed fell at the fastest rate for two years and is expected to fall slightly faster in the next quarter.

Business volume, value and profitability fell sharply during the quarter and further declines are expected in the next quarter.

While costs per person employed rose strongly, firms did not pass this on to customers in the form of price rises.

Among business and professional firms, five out of six of the sub-sectors saw big falls in volumes and profitability in the quarter, with only telecoms/computing seeing little change.

Office and personnel services had a tough quarter on all fronts with optimism about the business situation falling sharply.

Firms reported a surprising drop in average selling prices and expect further price falls in the next three months. Business volumes and values were well below normal for the time of year.

Firms reduced their headcount and expect to cut numbers at a faster rate in the coming quarter.

Marketing firms saw profitability drop sharply for the second quarter in a row on the back of unexpectedly steep falls in business volumes and values.

Costs and prices fell slightly and selling prices are expected to fall again more sharply in the coming three months. Marketing firms also shed staff in the last quarter and plan further cuts in the next quarter.

Telecoms and computing firms continued to show a degree of resilience compared with the other sub-sectors, with volumes of business and profitability stable.

Costs per person shrank for the first time in five years and the number of people employed grew.

But firms were gloomier about the business situation than they were three months ago and more worried about demand in the year ahead.

The volume of business is expected to fall sharply in the next three months and firms are expected to cut staff numbers.
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Date:Dec 8, 2008
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