UK private sector expects activity to fall through rest of 2026

UK private sector firms expect activity to decline during the final three months of 2026, extending a period of negative growth expectations that has persisted since late 2024, according to the latest CBI Growth Indicator.

Businesses expect activity to fall in the three months to December, recording a weighted balance of -14%, although expectations are generally less negative than earlier in the year.

The weakest outlook was recorded across the distribution sector, where firms expect volumes to fall sharply with a balance of -34%.

Business and professional services anticipate a 10% decline, while consumer services recorded a balance of -12%.

Manufacturers also expect output to fall, with a balance of -6%, although the CBI said this represented the sector’s least pessimistic expectations since March.

The subdued outlook follows another period of declining private sector activity. In the three months to September, activity fell at a weighted balance of -19%, with weakness concentrated in services and distribution.

Manufacturing output, by comparison, declined only slightly over the period.

Alpesh Paleja, Deputy Chief Economist at the CBI, said: “The outlook for growth remains subdued.

“The picture is mixed across sectors, particularly with some signs of resilience and even mild improvement in parts of manufacturing and professional services. But these are far outweighed by challenges weighing on conditions for all businesses.

“Cost pressures remain strong, especially around energy and employment and, coupled with weak demand, this continues to put pressure on margins, recruitment and investment plans.”

The CBI said uncertainty ahead of next month’s Budget was also affecting activity in some parts of the economy.

Paleja added: “Against the backdrop of renewed fiscal pressures, the Budget must draw a clear red line under any more rises in the cost of hiring, investing and doing business.

“The Chancellor must focus on easing the cumulative burden of costs, as an entry point to spurring dynamism and activity.”

The CBI called for measures including removing legacy policy costs from business electricity bills, exploring options to reduce employer National Insurance Contributions and establishing a clear path for business rates reform.