Job losses are an eventuality

For months we have watched the banking sector cut jobs at a record rate and a new report from the Confederation of British Industry (CBI) now expects similar cuts in the hospitality sector.

As the downturn deepens the CBI survey looked at consumer services, including hotels, bars and restaurants, travel and leisure.

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 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.

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 matter of urgency.

"As the recession deepens, firms are reducing business-to-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."

Words: Clare Riley

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