UK private sector braces for downturn to end of 2025, CBI warns

The UK’s private sector is bracing for another period of contraction, with businesses expecting activity to fall over the next three months, according to the latest CBI Growth Indicator.

A weighted balance of -20% of firms forecast a decline in activity in the fourth quarter of 2025, extending a run of negative expectations that began in late 2024. The downturn is expected to be broad-based, spanning services, distribution, and manufacturing.

In services, business volumes are set to fall by -18%, with weakness evident in both business and professional services (-14%) and consumer services (-31%). The distribution sector faces a particularly steep decline, with sales predicted to drop -33%, while manufacturing output is expected to shrink -14%.

The gloomy outlook follows a sharp fall in private sector activity in the three months to September, where firms reported an aggregate balance of -32%. All sub-sectors saw declines, marking a continuation of the difficult trading environment that has weighed on businesses for much of the past year.

“The weakness in private sector activity doesn’t show any signs of letting up and is now expected to persist to the end of this year. The themes cited by businesses paint a, by now, familiar picture: demand conditions are lacklustre, with firms feeling the knock-on impact of cautious spending and investment behaviour across the economy. Wrapped into this, the rise in employer NICs and the National Living Wage continue to bite on bottom lines. And a persistent climate of global economic uncertainty is further hampering decision making.”

Paleja also pointed to mounting concerns around the November Budget, with businesses worried about being asked to shoulder more of the burden of restoring the public finances.

“The business tax burden is already at a 25-year high, and the Chancellor must quickly reaffirm last year’s commitment to no more business tax rises, avoiding Budget speculation further curtailing sentiment in the run up to 26 November,” he added. “Doing so will boost confidence and accelerate the significant contribution businesses want to be making to the shared growth mission.”

Key survey findings include:

• Services sector volumes fell -35% in the three months to September, a faster rate of decline than in the previous quarter and marking 11 consecutive quarters of contraction.
• Both business and professional services (-35%) and consumer services (-34%) posted sharp falls.
• Hiring intentions remain weak, with headcount expected to dip in business and professional services (-5%) and plummet in consumer services (-39%).
• Selling price expectations in services have accelerated, rising to +14%, above the long-run average of +7%. Price pressures are strongest in consumer services (+27%), while business and professional services reported more modest inflation expectations (+10%).

The CBI noted that the combination of fragile demand, rising costs, and policy uncertainty risks prolonging the downturn unless confidence is shored up in the months ahead.