Spending in hotels, bars and restaurants fell "markedly" over the past three months leading to a record fall in profitability, according to the latest CBI Services Sector survey.
Consumer services firms - including hotels, bars and restaurants - endured an even worse quarter than they had feared, the employers' group said.
Business volumes and values fell at rates not seen since the end of 2001. At the same time, costs accelerated rapidly and profitability sank at a record rate.
Ian McCafferty, the CBI's chief economic adviser said: "Services sector firms are concerned about their business prospects. Consumers are reining in spending on leisure, entertainment and eating out."
Numbers employed by consumer services firms fell for the second quarter running, but this should be short-lived as firms plan modest job increases next quarter, the survey predicted.
By Daniel Thomas
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