Turnover in the business services sector plummeted in the fourth quarter of 2010, making it the poorest performing industry in the UK, according to the latest quarterly Bibby Financial Services’ Business Factors Index.
The Index, which tracks the turnover levels among Bibby Financial Services’ 3,800 strong UK client-base alongside the outlook of 300 business owners across the UK, reveals the business services sector reading fell from 92.5 in September 2010 to 87.3 in December 2010.
However, despite this quarterly decline in output in the industry, the Index shows that turnover in the fourth quarter of 2010 is seven per cent higher than in Q4 of 2009, displaying notable annual growth. This may be the reason for 80 per cent of firms offering a positive response when questioned on how their business is currently fairing, up from 71 per cent in Q3. This confidence is reinforced by 40 per cent of businesses saying they are hopeful for the future, the highest level of optimism shown by any sector.
The latest CBI survey says the business services sector – which includes accountancy, recruitment and marketing companies - is currently being impacted by falling prices, rising costs and lack of demand. With employment figures released in December by the Office of National Statistics (ONS) showing the number of people employed in the public sector fell by 33,000 in Q4, while the number of people employed in the private sector remained unchanged at 23.11 million, the question still remains as to whether the private sector will be able to offset large-scale public sector job cuts in 2011.
Edward Winterton, recruitment finance specialist at Bibby Financial Services, says: “It’s concerning that the business services sector remains the worst-performing industry after a promising revival in the third quarter of 2010. The knock-on effects from the Comprehensive Spending Review appear to have had the biggest negative impact on firms in the sector and with public sector cuts ongoing any thoughts of a full recovery must be put on hold.
“The key issue now for the sector is about stabilising business performance and trying to ensure this doesn’t continue to decline in to 2011. With the public sector cuts, the VAT rise and the growing uncertainty over the state of the UK economy, it is vital businesses have the financial support to secure long-term stability and manage fluctuating demand for services.
“The ability to ensure a healthy cash flow through the business is likely to become increasingly difficult in the coming months as firms negotiate a treacherous business landscape. Flexible sources of finance such as invoice finance offer a financial liquidity that enables firms to either stabilise their business or pursue opportunities for growth. This will be important to satisfying the needs of the UK business community as firms experience varying trading conditions across different regions and sectors.”
