Hotels and restaurants see falling sales and profits

UK hotels, bars and restaurants saw both the volume and value of business fall in the past quarter, according to the latest CBI Service Sector Survey.

The CBI's latest quarterly survey, conducted between 28 July and 11 August, covered 165 service sector firms divided into Business & Professional Services (accountancy and legal) and Consumer Services, such as hotels, bars and restaurants.

Within Consumer Services, 30% of hospitality operators said the value of business fell, while 21% reported an increase, resulting in a score of -8% for the period.

A quarter of hotels, restaurants and bars surveyed said volume fell as well, while 20% said it rose, giving a balance of -5%.

The CBI said both measures are seen as well below normal by companies and only a modest improvement has been predicted for the coming months.

Prices also continued to rise, for the third quarter in a row, with a balance of +19, while costs also rose with a balance of +23% for the sector.

This has meant that the overall profitability of business fell in consumer services, with a balance of -14%. Looking forward to the next three months, hospitality firms expect profitability to fall further, with a balance of -26%.

Ian McCafferty, CBI chief economic adviser, said: "Although our recent retail surveys have shown increased sales of high street goods, this survey shows that households are still reluctant to spend on services.

"Conditions remain difficult for consumer-facing firms, as volumes of business have edged lower over the past quarter."

In Business & Professional services value of business fell, with a balance of -13%, and volume was little changed (+2%), in line with expectations. Overall profitability fell during the quarter, with a balance of -29%.

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By Chris Druce

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