Improved Cash Flow Could Aid Services Sector Slump

6th April 2018.

The services sector took a heavy knock in March as bad weather such as the so-called “Beast from the East” pushed growth down to its lowest level since July 2016.

The recent bout of bad weather in the UK came at the wrong time for the services sector, with many of its restaurants closing down branches in a desperate bid to stay afloat. High profile restaurant chains such as Jamie’s Italian have even faced trouble, as the celebrity chef recently had to close 12 branches as part of a Company Voluntary Arrangement to restructure a £71.5 million debt. A recent Purchasing Managers Index survey reported a lower-than-expected reading of growth, as snowstorms cut businesses off from supplies and parts of their workforce. In the report, service firms blamed stunted growth on a sharp increase in costs in March, with inflation and business rates remaining high.

As many brick and mortar stores struggle with demand, many more are forced to expand. Restaurants, hotels and spas are all now considered a non-essential purchase by consumers, making it harder to gauge interest. As retailers move online to connect with the consumer, the service sector must also consider new concepts and create new ways to steal consumers from the competition. At the Credit Protection Association, our debt recovery services have been used to fuel many expansion projects and keep our members away from the CVAs.

A separate survey by UHY Hacker revealed that over one-third of the UK’s top 100 restaurant groups are operating at a loss as trading conditions become more difficult. With high streets overcrowded with ‘fast casual’ restaurants, those eateries boasting a more traditional experience are failing to attract the bolder consumers.

Peter Kubik, Partner in the UHY Hacker’s London office, says with Brexit hanging over consumers like a dark cloud, restaurants can’t expect a bailout from a surge in discretionary spending: “Consumers only have a finite amount of spending power when it comes to eating out, and the oversaturation of the market means that groups that fall foul of changing trends can very easily fail”.

The high street has fallen in popularity, with the uncomplicated process of online retail and food delivery orders complimenting consumer’s fast-paced day-to-day lives. More businesses are building an online presence and investing in new technology to ease the lives of their customers and their employees. Similarly, with the service sector, introducing new equipment, services and staff can attract the right interest. Hotels can introduce something as simple as online bookings, and food trucks and pop-up restaurants can allow younger consumers to sample fine dining in a different setting.

At the Credit Protection Association, we free up the cash flow for our members, affording them the financial freedom to explore new opportunities and projects. As the business landscape changes shape, having some financial cushion will help all sectors change with it.