Private sector remains under pressure - CBI Growth Indicator

Firms across the private sector expect activity to fall in the next three months (weighted balance of -13%), according to the CBI’s latest Growth Indicator. Nonetheless the pessimism has eased noticeably, with expectations at their least negative since November 2024.

The downturn is expected to be driven by falling distribution sales (-36%) and a modest decline in manufacturing output (-12%). Business volumes in the services sector are also set to drop, albeit marginally (-5%). Within services, February saw another bleak outlook for consumer services volumes (-38%), whereas business & professional services firms expect activity to rise in the three months to May (+4%).  This marks the most positive expectations for business and professional services since the quarter to October 2024.

The subdued outlook comes as private sector activity fell in the three months to February (-19%, at a slower pace from -33% in the three months to January). All sub-sectors reported falling activity.

Charlotte Dendy, CBI Economic Surveys & Data Manager, said: 

“While private sector firms still expect activity to fall over the next three months, the improvement in the outlook is notable – with expectations at their least negative since November 2024. Nevertheless, expectations remain well below their long-run average, underscoring the fact that firms continue to face a challenging trading environment.

“Businesses continue to highlight the impact of recent Budgets on costs, alongside weak customer confidence and a broader lack of demand indicating that the mood remains fragile.

“While the Spring Forecast may not carry the full weight of a Budget, it still provides an important moment for the Chancellor to double down on the government’s growth mission. With business costs continuing to weigh on private sector activity, growth and investment, broader solutions must be found on lowering business energy costs and on the practical implementation of the Employment Rights Act.”