Business pessimism eases ahead of Budget

UK private sector firms expect business activity to continue falling in the months ahead, although growth expectations are now at their least pessimistic level for almost two years, according to the latest CBI Growth Indicator.

Businesses expect activity to decline over the next three months, with a weighted balance of -11%, but this represents the least negative outlook recorded since November 2024.

The improvement has been driven largely by business and professional services firms, which expect volumes to remain broadly unchanged at -3%, while manufacturers anticipate a relatively modest decline in output, with a balance of -7%.

Conditions remain more challenging for consumer-facing sectors. Distribution firms expect activity to fall significantly, recording a balance of -21%, while consumer services businesses reported the weakest expectations at -31%.

The improved outlook follows another difficult period for the private sector, with activity falling in the three months to August at a weighted balance of -23%. The CBI said this was broadly consistent with the average pace of decline recorded since late 2024, with all of the sub-sectors covered by its survey reporting falling activity.

Alpesh Paleja, CBI Deputy Chief Economist, said the figures pointed towards tentative signs of stabilisation rather than a return to sustained economic growth.

“It’s encouraging that expectations for growth are the least negative in two years, which chimes with signs of resilience in other economic indicators,” he said.

“But the outlook is very mixed across sectors, with conditions more difficult among household-facing firms. Overall, our surveys paint a picture of a tentative move towards stabilisation, rather than strong, sustained growth.”

Paleja said businesses continued to face subdued demand and confidence alongside significant cost pressures, which were putting pressure on margins.

With the new Chancellor’s first Budget due in October, the CBI called on the Government to use the fiscal event to reduce business costs and improve UK competitiveness.

Paleja added: “That means reducing employer NICs to support hiring, removing legacy policy costs from electricity bills, and delivering fundamental business-rates reform that replaces punitive cliff edges, supports investment in premises and helps businesses revitalise high streets across the country.”