Firms across the private sector expect activity to fall in the next three months according to the CBI’s latest Growth Indicator.
Expectations for growth have now been negative since the end of 2024, and the latest outturn is roughly in line with the average seen over this time.
Business volumes in the services sector are anticipated to fall (-15%), driven by expected declines in business and professional services (-16%) and consumer services (-12%).
However, the latter marks the least pessimistic expectations since October 2024. Distribution sales are expected to decline sharply (-40%), but manufacturers anticipate output to stabilise over the three months to June (-3%), after a run of negative expectations over the past year.
The subdued outlook comes as private sector activity fell in the three months to March (-35%). All sub-sectors reported falling activity.
Alpesh Paleja, CBI Deputy Chief Economist, said: “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.
“These challenges are now compounded by the escalating conflict in the Middle East. The direct effects on businesses are numerous and still emerging, but firms are increasingly alert to the potential for higher energy costs, renewed supply chain disruption and tighter availability of key inputs.
“The prospect of higher consumer price inflation in the months ahead will also weigh further on growth, exacerbating an already difficult trading environment for many businesses.
“The Chancellor was right to avoid a knee-jerk response to the conflict in the Middle East, reaffirming a welcome commitment to protecting the UK’s public finances.
“Now the focus must be on working collaboratively with the business community to tackle the rising cost of doing business, which was already a problem before the conflict. This includes cutting policy costs on business’ energy bills and finding appropriate landing zones on the Employment Rights Act, which would support growth and help mitigate cost of living pressures.”