Pre-Budget uncertainty weighs on private sector outlook

Private sector companies expect activity to decline further over the next three months, according to the CBI’s latest Growth Indicator, extending a run of negative sentiment that began in late 2024.

A weighted balance of -27% of firms anticipate falling business volumes, with the downturn forecast to span all major sectors. Services businesses expect activity to fall (-26%), driven by weak outlooks in business and professional services (-23%) and consumer services (-40%) – the latter recording its lowest reading in six months.

Distribution sales (-26%) and manufacturing output (-30%) are also expected to contract, with manufacturers reporting their most pessimistic outlook in almost a year.

The figures come as private sector activity fell sharply in the three months to November (-35%), marking the fastest decline since August 2020. All subsectors reported reduced activity.

The surveys contributing to November’s Growth Indicator were conducted before the Autumn Budget announcement.

CBI Deputy Chief Economist Alpesh Paleja said some businesses may have paused spending decisions ahead of the Budget, adding that the uncertainty compounded ongoing pressures from subdued household demand and rising costs.

“Stability is the precursor to growth,” he said. “While last week’s Budget is likely to add further costs to businesses, notably with the addition of NICs to salary sacrifice pension contributions, the fiscal headroom created may provide some stability going forward.”

He called on government to work closely with industry to drive recovery: “The government must now leverage enterprise expertise to unlock economic growth. This starts by applying the effective model of compromise and partnership achieved on the Employment Rights Bill, by collaborating directly with business to boost growth.”

The Growth Indicator balance reflects the proportion of firms reporting rising activity minus those reporting a decline.