Firms across the private sector expect activity to fall in the
next three months (weighted balance of -18%), extending a run of
negative sentiment that began in late 2024, according to the
CBI's latest Growth Indicator.
The downturn is expected to be broad-based, with business volumes
in the services sector set to decline (-19%), driven by weaker
expectations in business & professional services (-16%) and a
continually negative outlook in consumer services (-28%). A
sizeable fall is also anticipated in distribution sales (-28%),
while manufacturing output is expected to dip modestly
(-6%).
The weak outlook follows a sharp fall in activity in the three
months to July (-29%). Most sub-sectors reported falling
activity, while manufacturing output was stagnant.
Alpesh Paleja, CBI Deputy Chief Economist,
said:
“Firms continue to face testing conditions, with expectations
pointing to another quarter of falling activity across the
economy. While not worsening, the persistently negative outlook
underlines the fragility of demand conditions.
“Against this backdrop, businesses continue to cite headwinds
from adjusting to higher employment costs, energy prices and
continued uncertainty from a volatile global environment. With
few signs of recovery on the horizon, firms are focused on
managing costs and streamlining processes in what looks set to be
a subdued second half of the year
“Building positive business sentiment will require the government
to translate its long-term strategic thinking into short-term
delivery progress. The government must work collaboratively with
business in the lead up to this year's Autumn Budget:
acknowledging the significant burdens that firms are facing and
mitigating the damaging impact on sentiment from continued fiscal
uncertainty.
“Detailing how the government will deliver its action plan to
tackle regulatory barriers to growth; positioning businesses to
invest in the people they need through a flexible Growth and
Skills Levy; and finding an appropriate landing zone for the
Employment Rights Bill are positive next steps the government
should be prioritising to build confidence in its growth
mission.”
Key findings from our monthly Services Sector Survey
showed:
- Business volumes in the services sector fell in the three
months to July (-35%), at a faster pace than in the quarter to
June. The latest data marked nine consecutive rolling quarters of
decline.
- Both business & professional services (-37%) and consumer
services (-30%) volumes fell through the quarter.
- But trends between the two sectors diverged: business &
professional services saw the fastest fall in activity since
October 2020, while consumer services reported the slowest
decline in nine months.
- Hiring intentions within the services sector remain weak.
Business & professional services expect headcount to fall
over the next three months (-19%), while consumer services
companies expect a comparatively sharper fall in numbers employed
(-37%).
- Selling price expectations in the services sector have eased
close to long-run averages (+11%; long-run average +7%).
Inflation expectations have retreated in both business &
professional services (+7%) and consumer services (+24%).
A balance is the weighted percentage of companies reporting
an increase minus those reporting a
decrease.
Notes to Editors:
The CBI Growth Indicator is a composite measure of activity,
based on responses to CBI surveys. In total, 895 firms responded
between 25 June and 15 July.
The CBI Growth Indicator is a composite of data on output, sales
and business volumes drawn from three of the CBI's long-running
qualitative UK business surveys: the Industrial Trends Survey
(ITS, covering manufacturing); the Distributive Trades Survey
(DTS, covering retail, wholesale and motor trades); and the
Service Sector Survey (SSS, covering business, professional and
consumer services).
The Growth Indicator covers the volume of output for the ITS,
volume of sales for the DTS and volume of business for the SSS,
for the past three months and next three months.
