From high street pubs to City law firms, the services sector is hurting as spending dries up. The Times examines some of the service industries most affected by the economic gloom.

Recruitment

The industry is suffering as companies in almost every sector cut jobs and clamp down on hiring during the downturn. Figures from the Recruitment & Employment Confederation show that permanent placements fell for the eighth consecutive month in November, with the reduction in the number of people placed in jobs accelerating to a survey record. Temporary staff positions, the bread and butter of the industry, also fell at the sharpest rate since the survey began. Recruitment companies now have more clients looking for work than ever before, but fewer jobs to fill.

Tom Hadley, director of external relations at the confederation, said that recruitment was suffering as people decided to stay in their jobs rather than look for a new position, although public sector recruitment was still performing relatively well.

Law

Although the legal services market has yet to feel the impact of the slowdown as acutely as other services, the strain is beginning to show. A number of leading firms are holding redundancy talks, with more than 1,000 job losses confirmed and more expected. The outlook for smaller firms is even worse, according to Tony Williams, a former managing partner of Clifford Chance. Staple practice areas, such as M&A and commercial property, were showing “barely a flicker” of activity, he said.

Those firms could find themselves fighting for survival in the next few months, with increasing premiums for professional indemnity insurance, banks tightening credit lines and clients attempting to delay bills and to reduce fees.

The real squeeze will come at the end of January, when the partnership income tax bill is due.

Yet even firms in a healthy position are expected to struggle to repeat last year's record financial performance.

Pubs and restaurants

The pub industry was one of the first sectors to suffer as the smoking ban was followed by the credit crunch, soaring costs, duty increases and ever cheaper supermarket alcohol.

Rooney Anand, chief executive of Greene King, the brewer and owner of about 2,500 pubs, said that trading conditions were “the toughest for a long time” and profit margins were under “severe strain”.

Restaurant chains, including PizzaExpress and Café Rouge have resorted to two-for-one offers to fill tables, while Mitchells & Butlers, the operator of such food-led pub chains as All Bar One and Toby, said that it was winning custom as consumers traded down from more formal restaurants to pubs that serve food.

Tim Clarke, the Mitchells chief executive, said that consumer spending had “materially declined in the last couple of months” and the company was focusing on promotions to generate trade during weekdays.

YO! Sushi, the sushi bar chain, said that since the autumn it had suffered its first material decline in like-for-like sales in a decade.

Estate agents

With house sales plummeting, between 5,000 and 7,000 estate agents have lost their jobs this year and many who remain in work have seen their commission-driven salaries drastically reduced. Industry estimates suggest that up to half of the country's 30,000 agents could be looking for work before the housing market starts to improve.

Cashflow could come under even more pressure in the new year, when funding will be stretched by tax payments for partners, VAT liabilities and property costs.

Colin Ives, partner at BDO Stoy Hayward LLP, said: “In the last year we have witnessed more and more firms struggling. In some cases, they have failed due to lack of cash and the increasing burdens that they are facing through the current economic climate and changes affecting the profession.”

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts