UK private sector signals broad-based contraction ahead, CBI warns

UK businesses are bracing for a modest contraction in activity over the coming months, according to the latest CBI Growth Indicator, which warns of continued weakness across the private sector.

Firms expect activity to fall in the three months to November, with a weighted balance of -15%, extending a run of negative forecasts that began in late 2024. While expectations are less pessimistic than earlier this year, the downturn is set to remain broad-based, impacting services, distribution, and manufacturing alike.

In the services sector, business volumes are predicted to decline 15%, dragged down by weaker sentiment in business & professional services (-13%) and consumer services (-22%). Distribution sales are also expected to fall sharply (-19%), while manufacturing output is forecast to contract by 13%.

Despite this, the latest figures suggest a slightly softer slowdown compared with the first half of 2025, when outlooks were more severe.

The fragile projections follow a difficult summer for UK businesses, with private sector activity falling 26% in the three months to August. All major sub-sectors reported declining output during that period, highlighting the persistent strain on the economy.

Alpesh Paleja, Deputy Chief Economist at the CBI, warned that firms remain under significant pressure despite the marginally improved forecasts:

“The outlook remains subdued across the private sector, as businesses continue to grapple with sluggish demand, higher employment costs, increasing uncertainty, and squeezed margins. However, expectations for activity are less negative than in the first half of the year, which is a thin silver lining.”

Paleja added that companies are prioritising resilience and efficiency over growth and investment: “There’s little evidence yet of a meaningful turnaround, and firms are increasingly focusing on building resilience as they navigate a challenging economic environment — often at the expense of capital spending and longer-term ambitions.”

The CBI also urged the government to avoid adding to the strain on businesses in the upcoming Autumn Budget. Paleja called for measures to cut the cost of doing business, provide tax certainty, deliver more flexibility to the Growth and Skills Levy, and rethink the Employment Rights Bill.

A weighted balance in the CBI Growth Indicator represents the percentage of firms reporting an increase minus those reporting a decrease.