Wednesday, 4 October, 2000, 14:03 GMT 15:03 UK

Britain: Fuel crisis hits retailers, services

More evidence of the impact of last month's fuel crisis on the UK economy emerged on Wednesday as data showed that growth in retail sales and the services sector had slowed sharply.

The Confederation of British Industry said retail sales grew at their slowest rate for 17 months in September as deliveries failed to arrive and shoppers remained at home.

Nearly one third of retailers reported a fall in sales, with off-licences, furniture shops and clothing sellers among the hardest hit.

The CBI survey confirmed the findings of an earlier report by the Chartered Institute of Purchasing & Supply showing growth had also contracted in the services sector.

Profitability at oil firms, meanwhile, has risen to 33.1%, official figures showed on Wednesday.

Transport badly hit

The CIPS, in its regular monthly survey, said its seasonally-adjusted business activity index measured 55.0 for September, down substantially from 58.3 the month before but remaining well above the no-change level of 50.

Disruptions caused by the fuel crisis meant the pace of expansion had slowed to levels not seen since March 1999, while prices rose and business optimism tumbled.

"The transport sector in particular was reported to have been badly hit during the month," the CIPS said.

The survey's findings were in line with the institute's earlier report on September manufacturing activity, which showed a similar cooling in activity.

Record prices

The CIPS September input and output price indices both rose to record levels.

The input price index measured 63.7, up from 60.3 in August, as rising demand for staff put upwards pressure on labour costs.

"Moreover, with rising fuel and energy prices, increased general purchase prices and the weakening of the pound against the dollar all reported to have raised costs during the month, input prices rose at the fastest rate in the four-year survey history," the CIPS said.

Prices charged by companies also rose but at a lower rate than input prices, suggesting strong competition was preventing firms passing on increases in their costs.

Business optimism slipped to a 19-month low in September "as a result of increased concerns over preserving margins in a competitive market, high fuel prices and the subdued state of the manufacturing economy".

Optimism was highest in the computing and information technology sector and lowest among personal service providers.

Rigs boost revenue

Figures from National Statistics on Wednesday showed profitability at offshore drilling operations around the UK at 33.1% between April and June, up from 26.6% the quarter before.

Statisticians credited the rise on increasing oil prices, and extra gas production.

In the services sector profitability, measured by comparing operating surplus with capital employed, fell to 13.4% from 14.1% in the first quarter of the year.

The profitability of manufacturers fell to 6%, compared to a peak of 13.2% reached during 1998.

http://news.bbc.co.uk/hi/english/business/newsid_955000/955737.stm

-- Carl Jenkins (Somewherepress@aol.com), October 04, 2000