Tepid growth expectations continue into new year – CBI Growth Indicator

Firms across the private sector once again expect activity to fall in the next three months (weighted balance of -20%), according to the CBI’s latest Growth Indicator. Nonetheless this pessimism has eased somewhat, with growth expectations at their least negative in three months.

The downturn in activity is expected to be broad-based, with business volumes in the services sector set to decline (-16%) – driven by subdued expectations in business & professional services (-11%) and a bleak outlook for consumer services (-38%) volumes. Distribution sales are also expected to fall in the three months to April (-37%), and manufacturers anticipate another modest fall in output (-14%). However, negative expectations for manufacturers did ease for a second month running.

This disappointing outlook comes as private sector activity fell in the three months to January (-33%, broadly unchanged from -34% in the three months to December). All sub-sectors reported falling activity.

Alpesh Paleja, CBI Deputy Chief Economist, said: 

“The UK economy has not experienced a strong start to 2026. While there are tentative signs of stabilisation and resilience in some specific areas, the big picture remains similar to much of last year: businesses remain cautious, households are downtrading and confidence is still fragile. Recent geopolitical tensions will only have added to uncertainty at the margin.

“Worryingly, our latest surveys show that persistently weak growth expectations are now accompanied by an uptick in price pressures – at a time when inflation is already uncomfortably high. That combination risks a further squeezing of margins and dampening of investment, just when the economy needs momentum.

“If the government wants to shift the dial, it must focus on the fundamentals of competitiveness. That means lowering the cost of doing business, starting with decisive action on energy costs and streamlining regulation to give firms the confidence to invest. Clear signals and rapid progress on these fronts would provide an immediate boost to business confidence and help turn tentative stabilisation into sustainable growth.”

Key findings from our monthly Services Sector Survey showed: 

• Business volumes in the services sector fell in the three months to January (-37%), at a broadly similar pace to December.
  • Both business & professional services (-33%) and consumer services (-50%) volumes fell heavily through the quarter.
• Hiring intentions within the services sector remained negative (-16%), extending a run of weakness that began in late 2024. Business & professional services companies expect headcount to fall slightly over the next three months (-8%), while consumer services firms expect a more significant fall in numbers employed (-29%).
• Selling price inflationexpectations in the services sector accelerated, for the second consecutive rolling-quarter (+26%, from +15% in December, and +7% in November). This reflects a pickup in expectations for business & professional services firms (+27%), whereas consumer services selling price expectations were broadly unchanged (+24%).