Private Sector Business Activity Rounds Off A Tough Year

Firms across the private sector once again expect activity to fall in the next three months (weighted balance of -30%), according to the CBI’s latest Growth Indicator. This extends a run of negative predictions that began in late 2024.

The downturn is expected to be broad-based, with business volumes in the services sector set to decline (-29%), driven by weak expectations in both business & professional services (-24%) and consumer services (-46%). Expectations for distribution sales deteriorated significantly, to their weakest since June 2020 (-47%). In contrast, while manufacturers predict another modest fall in output (-17%), expectations were less negative than last month, moving roughly back to where they were in October.

The disappointing outlook comes as private sector activity fell again in the three months to December (-34%, broadly unchanged from -35% in the three months to November). All sub-sectors reported falling activity.

Alpesh Paleja, CBI Deputy Chief Economist, said: “Our latest surveys round off a disappointing year for private sector growth. They mark a continuation of the headwinds that have plagued businesses over the past 12 months: tepid demand conditions, with households cautious around spending; and strong cost pressures squeezing margins."

“Uncertainty ahead of November’s Budget also put the brakes on key spending decisions and big projects, choking up pipelines of work. The latest Growth Indicator suggests that the alleviation of this uncertainty hasn’t materially boosted activity."

“Business cannot face another year of stasis and will be looking for the government to expedite delivery in 2026. The effective model of compromise and partnership achieved on the Employment Rights Bill demonstrates what can be achieved through meaningful collaboration."

"The government must now further leverage private sector expertise to broaden industrial energy cost support and simplify the tax system in pursuit of its growth mission.”

A balance is the weighted percentage of companies reporting an increase minus those reporting a decrease.

Key findings from our monthly Services Sector Survey showed:

• Business volumes in the services sector fell in the three months to December (-40%), at a broadly similar pace as in the three months to November.
  

• Both business & professional services (-34%) and consumer services (-40%) volumes fell heavily through the quarter.
  

• Hiring intentions within the services sector remain weak (-34%), now at their lowest since July 2020. Business & professional services companies expect headcount to fall over the next three months (-24%), while consumer services firms expect a sharp fall in numbers employed (-51%).
  

• Selling price inflation expectations in the services sector accelerated in December (+15%, from +7% in November). This reflects a pick up in expectations for both business & professional services firms (+12%) and consumer services (+26%).