Pessimism around private sector activity eases a touch – CBI Growth Indicator
Firms across the private sector expect activity to fall in the three months to October (weighted balance of -18%), according to the CBI’s latest Growth Indicator.
However, expectations are the least negative since March, just after the outbreak of the Iran conflict. But looking back further, the latest results extend further a period of negative predictions for growth that began in late 2024.
Modest falls in activity in business & professional services (-14%) and consumer services (-14%), along with a larger fall in manufacturing output (-30%), are expected to drag on activity. However, while distribution sales are also expected to decline (-20%), these mark the least pessimistic expectations since August 2025.
The subdued outlook comes as private sector activity fell in the three months to July (-21%), though at the slowest pace since February (-19%). All sub-sectors reported falling activity.
Alpesh Paleja, CBI deputy chief economist, said:“Businesses are slightly less pessimistic about the outlook than they were a few months ago, but they are far from breathing a sigh of relief. Firms continue to report subdued demand, hesitant customers and weak confidence, while persistent cost pressures are keeping margins squeezed. Renewed tensions in the Middle East have added another headwind that had previously begun to ease. The result is an economy that appears to be finding a floor, but not yet a firm footing.
“The persistently negative data in our surveys highlights the economic challenge facing the new Prime Minister and his team, as they begin to set out their agenda. Recent announcements around support for households and the high street are welcome but if government wants growth that lasts, it needs to make the UK a better place to invest, hire and scale. That means cutting the cost of doing business – from energy bills and labour costs to tax and planning – speeding up delivery, and creating the conditions for private capital to crowd in.
“Fostering conditions that inspire businesses to create jobs and invest is imperative to lowering the cost of living for households, allowing all to benefit from consistent economic gains.”
Key findings from our monthly Services Sector Survey showed:
- Business volumes in the services sector fell in the three months to July (-24%), at a slower pace than June.
- Both business & professional services (-21%) and consumer services (-33%) volumes fell through the quarter.
- Hiring intentions within the services sector remained negative (-14%), though are at their least pessimistic since October 2024. Business & professional services expect headcount to be cut slightly (-10%) in the three months to October, while consumer services expect a larger reduction (-22%).
- Selling price expectations in the services sector remain elevated (+14% in July). This reflects a slight strengthening in selling price expectations for business & professional services (+11%), while expectations for consumer services have cooled again (+24%).
A balance is the weighted percentage of companies reporting an increase minus those reporting a decrease.