Private sector anticipates broad-based summer weakness – CBI Growth Indicator
Firms across the private sector expect activity to fall in the three months to August (weighted balance of -24%), according to the CBI’s latest Growth Indicator.
Companies’ expectations are broadly unchanged from April, when the report was last published, and extend a period of negative predictions for growth that began in late 2024.
Business volumes in the services sector are anticipated to fall (-28%), driven by expected declines in consumer services volumes (-30%) and business & professional services (-27%); expectations in the latter are at their weakest in a year. Distribution sales are also expected to decline (-23%), and manufacturers anticipate a modest fall in volumes over the next three months (-13%).
The subdued outlook comes as private sector activity fell in the three months to May (-31%). All sub-sectors reported falling activity.
Alpesh Paleja, CBI deputy chief economist, said: “The hot weather may have arrived, but businesses are still feeling the chill as they head into summer. Activity continues to be buffeted by weak household spending and clients’ reluctance to commit to big expenditure. Ongoing tensions in the Middle East are adding another layer of pressure, with firms increasingly alert to the risk of further cost increases and supply chain disruption.
“Our surveys already show a ramping up in cost pressures, particularly in manufacturing and consumer services. In most cases, firms are absorbing a significant share of these additional costs through already wafer-thin margins.
“Businesses want to grow, but many are being forced to focus on resilience rather than expansion. Firms need an easier and cheaper environment in which to operate. That means further measures to cut business energy costs, action to ease high labour costs, and a serious push to reduce the regulatory burden that is weighing on investment, employment and growth.”