Firms across the private sector expect activity to fall in the next three months, extending a run of negative predictions that began in late 2024, according to the Confederation of British Industry’s latest Growth Indicator.
The downturn is expected to be broad-based, with business volumes in the services sector set to decline by 18%, driven by weak expectations in both business and professional services (down 14%) and consumer services (down 31%). Distribution sales are expected to fall by a third, alongside a contraction in manufacturing output of 14%.
The disappointing outlook comes as private sector activity fell in the three months to September by almost a third (32%) and all sub-sectors reported falling activity.
Alpesh Paleja, the CBI’s Deputy Chief Economist, said: “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.
“This is now accompanied by renewed nervousness around the November Budget, with businesses concerned about being asked to again shoulder the burden of fixing 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.
“Doing so will boost confidence and accelerate the significant contribution businesses want to be making to the shared growth mission.”
CBI Lead Economist Ben Jones added: “Manufacturers report a mix of pressures weighing on the sector: high energy costs, uncertainty over taxation and economic policy, and ongoing difficulties in accessing skilled labour.
“In this environment, planning for growth is extremely challenging, and this is feeding through to weaker orders, output and investment. While the pace of decline has eased, conditions look set to remain tough through to the end of the year.
“Businesses across the board are looking ahead to the November Budget with hope that it delivers meaningful action to ease cost and regulatory pressures.
“Without that clear policy direction, confidence will continue to ebb, and firms will find it increasingly difficult to invest, hire and grow. They also hope to see the government use the coming weeks as an opportunity to refine the Employment Rights Bill so that a pragmatic and workable landing zone that avoids unintended consequences for growth can be found.”