Survey shows consumers are tightening their belts

Consumers are tightening their belts as they battle the credit crunch, according to a CBI survey published today.

Service companies are suffering their worst period for seven years, with business falling over the past three months at a time when costs have risen rapidly.

The survey shows professional services companies - such as lawyers, architects, IT companies, accountants and head hunters - fared better. They continued to grow but at well below previous levels.

Ian McCafferty, the CBI's chief economic adviser, said: "Service sector firms are concerned about their business prospects," said Ian McCafferty, the CBI's chief economic adviser.

"Consumers are reining in spending on leisure, entertainment and eating out, while professionals offering services such as accountancy, property and law have seen their profits flatten off as costs continue to grow."

Within the consumer services sector, the CBI said that only travel firms saw business grow but with costs rising rapidly and little scope for passing on the increase to consumers, profitability fell at a record rate.

Companies providing transport for goods and post were hard hit, with volumes falling at their fastest rates since the CBI survey began in 1998 and employment levels plummeting.

The survey showed the telecommunications and IT sector saw sharply higher volumes driven by aggressive price-cutting while marketing companies saw profitability rising at a record rate.

27 May 2008 © Moneyextra.com

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