Private sector outlook weakest since 2022, CBI warns

The UK’s private sector is facing its bleakest outlook in nearly three years, according to the latest CBI Growth Indicator, with firms anticipating a continued decline in activity over the summer months.

Businesses expect activity to fall over the next three months to August, with a weighted balance of -30%. This marks the weakest set of expectations since September 2022, reflecting growing concerns across key sectors of the economy. The latest report shows that private sector activity already fell in the three months to May, with a decline of -26%, down from -19% in April. The downturn was broad-based, affecting all major sectors.

Expectations in the services sector have deteriorated sharply, with business volumes forecast to drop by -32% – the lowest since November 2022. This includes declines in both business and professional services, where volumes are expected to fall by -29%, and in consumer services, which face an even steeper expected decline of -43%.

The distribution sector is also bracing for a difficult period, with sales expected to fall by -39% by August, a level not seen since September 2022. Meanwhile, manufacturers anticipate a -14% decline in output over the same period, further highlighting the widespread nature of the downturn.

Alpesh Paleja, Deputy Chief Economist at the CBI, said there is little sign of “summer cheer” in the latest data.

He warned that business momentum, already weaker than official figures suggested at the start of the year, has continued to stall amid a backdrop of rising costs and growing uncertainty.

Paleja highlighted several factors contributing to the weak outlook: “Firms highlight numerous headwinds: the continued impact of higher employer NICs and the National Living Wage hike on their costs and operations; further uncertainty from developments in the global trade landscape; compounded by a general sense of weak demand at home.”

With the government’s Spending Review and Industrial Strategy announcement expected within weeks, Paleja urged policymakers to take decisive action. “The government has a critical opportunity to drive innovation, investment and sustainable economic growth – through expanding the Made Smarter Programme, delivering a real National Tech Adoption Plan, reforming business rates, delivering flexibility around the Apprenticeship Levy and increasing incentives for occupational health.”