CBI reports weakening private sector growth expectations

Private sector firms expect business activity to decline further over the coming months, according to the latest CBI (Confederation of British Industry) Growth Indicator, as weak demand, cost pressures and geopolitical uncertainty continue to weigh on confidence.

The survey found that firms across the private sector expect activity to fall in the three months to September, with a weighted balance of -28%, slightly weaker than in May and extending a run of negative growth expectations that began in late 2024.

The CBI said growth expectations have deteriorated further since the escalation of conflict in the Middle East earlier this year, adding to an already challenging business environment.

Distribution businesses reported the weakest outlook, with activity expected to fall sharply (-44%), followed by manufacturing (-31%) and business and professional services (-26%). Manufacturing firms in particular reported a marked deterioration in confidence compared with recent months.

Consumer services businesses were comparatively more optimistic, although they still expect activity to decline slightly (-5%), representing the least pessimistic outlook from the sector since August 2024.

The subdued expectations follow a weak second quarter, with overall private sector activity falling in the three months to June (-34%). All major sectors reported declining business activity during the period.

“Weak demand, fragile confidence and persistent cost pressures still dominate the business landscape, while geopolitical uncertainty continued to hit investment and major purchasing decisions.

“While there are isolated pockets of resilience, particularly in aerospace and some service niches, there is little sign yet of a sustained improvement in underlying activity.”

Paleja called on policymakers to prioritise measures that would restore business confidence and encourage investment.

He said: “The latest Growth Indicator is a reminder that amid shifting political sands at home, the economy needs to remain front and centre of policymakers’ focus. Businesses are looking for certainty, not delay.

“The next Prime Minister should focus on the long-term decisions that will strengthen confidence and unlock investment by publishing the Defence Investment Plan, making further progress on reducing industrial energy costs and strengthening the UK’s trading relationship with the EU.”

The CBI’s monthly Services Sector Survey also highlighted continued weakness across the UK’s services economy. Business volumes in the sector fell by a weighted balance of -34% in the three months to June, broadly unchanged from May, with declines reported across both business and professional services (-35%) and consumer services (-31%).

Employment expectations also remained negative, with services firms expecting headcount to fall over the next three months (-26%). Consumer services businesses anticipate the sharpest reductions (-38%), while business and professional services firms also expect staffing levels to decline (-19%).

There was some encouragement on inflation, however, as selling price expectations eased for a second consecutive month to +11%, returning towards long-term averages. The CBI said inflation expectations across the services sector are now at their weakest level since November 2025, suggesting some easing in pricing pressures despite the subdued outlook for growth.