UK private sector outlook remains subdued, CBI survey finds

The outlook for UK private sector activity remains weak, with firms expecting a further decline in business volumes over the coming months, according to the latest Growth Indicator from the Confederation of British Industry (CBI).

The survey shows that activity across the private sector is forecast to fall over the next three months, with a weighted balance of -18%. Expectations have now remained negative since the end of 2024, reflecting continued caution among businesses amid a challenging economic backdrop.

Services firms, representing a large share of the UK economy, expect activity to decline by -15%, driven by falls in both business and professional services (-16%) and consumer services (-12%). While still negative, the outlook for consumer services is the least pessimistic since October 2024.

Elsewhere, distribution sales are expected to drop sharply (-40%), highlighting ongoing weakness in retail and wholesale markets. Manufacturers, however, anticipate a more stable period ahead, with output expectations at -3% – an improvement after a prolonged stretch of negative forecasts.

The subdued outlook follows a difficult start to the year, with overall private sector activity falling significantly in the three months to March (-35%), as all major sectors reported declines.

Alpesh Paleja, CBI Deputy Chief Economist, said there were only limited signs of improvement.

“As we moved into Spring, there were tentative signs of activity beginning to thaw in parts of the economy. But overall, it’s clear that growth expectations remained weak, as businesses continued to grapple with uneven demand, persistent cost pressures and low confidence.”

He warned that rising geopolitical tensions are adding further uncertainty. “These challenges are now compounded by the escalating conflict in the Middle East… firms are increasingly alert to the potential for higher energy costs, renewed supply chain disruption and tighter availability of key inputs.”

Paleja added that the risk of rising inflation could further dampen growth prospects, urging policymakers to focus on reducing the cost burden on businesses. “Now the focus must be on working collaboratively with the business community to tackle the rising cost of doing business… including cutting policy costs on energy bills and finding appropriate landing zones on employment regulation.”