Service jobs lost amid price cuts

The Chartered Institute of Purchasing and Supply (CIPS) said fierce competition meant service companies cut prices at a record rate in January.

Its latest industry survey blamed the resulting drop in profit margins and a marked reduction in sales for the sharpest fall in services employment in 13 years as the UK grapples with recession.

The CIPS data showed activity in the sector near historic lows despite easing slightly from December. The survey gave a reading of 42.5 for January, where a score less than 50 indicates industry contraction.

Roy Ayliffe, director of professional practice at CIPS, said: "With competition heating up, companies were forced to reduce their prices and axe staff at an unprecedented rate.

"But as overall levels of sector activity fall, it's clear that such efforts are superfluous: only the fittest will survive."

He said hotels and restaurants were the worst hit by the tough trading conditions.

The survey, which covers transport and communication, financial, business and personal services as well as IT, hotels and restaurants, found sentiment in the industry remained historically low in January, despite a slight pick-up from the previous month.

CIPS said reduced activity was linked to sharply falling levels of new business, which declined for the ninth successive month, albeit at a rate that was "markedly improved" from the severe drops at the end of last year.

Paul Smith, of survey partner Markit Economics, said: "While improvements in the activity and new business indices are encouraging and provide further tentative evidence that we may be passing through the deep point of the recession, the sector remains in a very weak state."