Firms across the private sector expect activity to fall in the next three months (weighted balance of -20%), extending a run of negative predictions 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 (-15%), driven by weak expectations in both business & professional services (-12%) and consumer services (-28%). Distribution sales are expected to fall sharply (-34%), alongside a contraction in manufacturing output (-19%).

The disappointing outlook comes as private sector activity fell in the three months to October (-32%), the same pace as in the three months to September. All sub-sectors reported falling activity.

Alpesh Paleja, Deputy Chief Economist, CBI, said:

“Firms are facing a difficult winter, with private sector momentum weak and confidence fragile. Uncertainty around the upcoming Budget is weighing heavily on sentiment, with many firms keeping key decisions on hold until more clarity is forthcoming. Cost pressures from a variety of sources remain strong, with last year’s tax rises adding to the drag.

“As a result, tough decisions to deliver policy stability and address fiscal pressures will be needed at the Budget. Our surveys clearly show that the private sector cannot bear the brunt of these decisions once again. The business tax burden is already at a 25-year high and – rather than tinkering around the edges – the Chancellor must strategically address the tax system’s complexities that are undermining growth and deliver a Budget and tax system that helps businesses invest, hire, and scale.”

Key findings from our monthly Services Sector Survey showed:

• Business volumes in the services sector fell in the three months to October (-35%), at the same pace as in the three months to September.

• Both business & professional services (-34%) and consumer services (-40%) volumes fell heavily through the quarter.

• Hiring intentions within the services sector remain weak. Business & professional services expect headcount to fall modestly over the next three months (-11%), while consumer services companies expect a sharp fall in numbers employed (-33%)

• Selling price expectations in the services sector eased to their long-run average in October (+7%, from +14% in September). Inflation expectations have moderated for both business & professional services firms (+5%) and consumer services (+18%)

• A balance is the weighted percentage of companies reporting an increase minus those reporting a decrease.