Restaurants, hotels and pubs at busiest since 2007, yet profits fall sharply

The survey of 161 companies in the services sector, including business and professional services, experienced its sharpest growth since before the start of the recession and revealed expectations for a strong quarter ahead. 

However, while hospitality and tourism businesses did experience a boost to trade, profitability in these sectors also experienced its sharpest fall (15 per cent) since February 2012 as businesses struggled to turn a profit when faced with rising food and energy bills. 

As a result the survey found that the majority of the 64 consumer services firms questioned were remaining cautious about the future and would continue as they were, rather than expand or invest in the business or recruitment over the next year. 

Stephen Gifford, CBI director of economics said: “Confidence has risen strongly across the board, and the outlook is positive in the short-term. But 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. But, all being well, business should continue to pick up through this year and into next.”

Positive boost​

One business which has viewed the volume boost positively is wine bar and restaurant chain Davy's. The company, which operates almost 30 sites across London, said sales so far this year were up 15 per cent on last year and as a result would be looking at investing in the business over the next 12 months. 

"This rise in sales looks like a strong trend throughout the industry, certainly in central London," said Davy's chairman James Davy. "If the recovery continues to strengthen, we believe that our business will maintain this strong growth, which will be a solid platform for future expansion." 

Omni Rothschild, general manager at Presidential Apartments, the luxury serviced apartments business based in Kensington, said occupancy rates had continued to rise at the 58-bedroom property he manages and he is expecting further growth into next year.

"There’s definitely a feel good factor in the air, that is increasing consumer spending and clearly benefiting the hospitality sector and a business like ours, which targets the luxury end of the market," he said. "The success of last year’s Olympics has surely boosting tourism to the capital but these statistics show that the economy is continuing on an upward trajectory, which should help grow the industry as a whole.”