Private Sector Expects Activity To Fall In Next Quarter

Private sector firms expect activity to fall in the three months to February 2025 (weighted balance of -10%), according to the CBI’s latest Growth Indicator. This marks the first time this year that expectations for growth have been negative.

Business volumes in the services sector are anticipated to decline (-13%), with a slight fall in business & professional services (-7%) and a sharper decline in consumer services (-33%), both marking the weakest expectations for around two years. Distribution sales are also expected to fall (-20%), while manufacturers anticipate output to rise modestly in the three months to February (+9%).

The tepid outlook comes as private sector activity fell again in the three months to November (-13%), falling at a faster pace than in the three months to October (-4%). All three major sectors reported falling business volumes, sales or output.

Alpesh Paleja, CBI Interim Deputy Chief Economist, said: “As we head into 2025 expectations for growth have taken a decisive turn for the worse. Our surveys suggest that anticipated activity was already weakening heading into the October Budget and the Chancellor’s announcements have left businesses with even more tough choices to make."

“News that firms are planning to reduce headcount is a concern, with hiring intentions at their weakest since the tail-end of the COVID-19 pandemic. This could be an early sign of the impact of higher labour costs from the upcoming rise in employer NICs, and the uprating in the National Living Wage."

“Against this background, firms are looking to government to take a lead in helping generate positive momentum for the economy. That means moving quickly and decisively to reform business rates, deliver apprenticeship levy flexibility, and boost occupational health incentives to support the health of the workforce.”