Restaurant and hotel profits fall despite service sector growth

Profitability has fallen at restaurants, hotels and pubs, despite better trading in the services sector.

That is one of the findings of the latest quarterly CBI survey into business activity and confidence in the service sector.

Activity in consumer services such as travel, food and drink grew at its highest level since August 2007, according to the survey.

But profitability among restaurants, hotels and pubs fell, suggesting that many businesses are resisting passing on rising costs to consumer because of the tough competitive environment.

Services account for around three quarters of the UK's economic output, and the resurgence in the services sector, which has also seen a strong performance in business and professional services, has helped UK GDP to rise by a better-than-expected 0.7% in the second quarter.

The CBI's director of economics, Stephen Gifford told the BBC: "Consumer services firms are a bit more worried about the longer term, and have scaled back their investment and expansion plans."

"Conditions remain tricky as households grapple with the prolonged squeeze on real incomes and business confidence remains vulnerable to any adverse developments in the global economy."