Future growth projections for businesses plummet to levels not seen since 2022.
Business Growth Outlook Dims
It's a gloomy outlook for the private sector as growth expectations plummet, according to the latest CBI survey. A staggering 30% more firms anticipate a decline rather than an uptick in activity over the next three months.
"The summer vibes are nowhere to be found in our surveys," says Alpesh Paleja, the CBI's deputy chief economist. "Our surveys were already indicating weaker momentum than official data at the onset of the year, and it seems that trend has persisted."
Every sector, except manufacturing, anticipates a steeper growth slowdown than the previous three months. The services sector, in particular, foresees a significant decline, with a 32% net negative sentiment – the weakest since November 2022.
The anticipated drop is driven predominantly by predictions of decline in business and professional services (-29%) and consumer services (-43%). Distribution sales also expect a decline in the three months to August, with a -39% net negative sentiment, the worst since September 2022, while manufacturing output has a 14% net negative sentiment, albeit slightly better than the previous three months.
The Silver Lining: Industrial Strategy
The dismal forecast comes as Chancellor Rachel Reeves prepares to unveil her first spending review next week, setting budgets for government departments until 2029.
"With the Spending Review and Industrial Strategy just around the corner, the government has a golden opportunity to drive innovation, investment, and sustainable economic growth," adds Paleja.
To kickstart the movement, Paleja suggests expanding the Made Smarter Programme, delivering a National Tech Adoption Plan, reforming business rates, delivering flexibility around the Apprenticeship Levy, and increasing incentives for occupational health.
Behind the Numbers
The UK's economic growth is influenced by various factors, such as robust business investment and a strong first quarter in 2025[1]. However, global trade tensions could diminish growth by 0.3% for the remainder of the year[1]. Private sector firms might be tentative due to these uncertainties and the ongoing impact of US trade policies.
The initial growth was fueled primarily by the services sector, including administrative and support services, wholesale and retail trade, and information and communication[3]. Despite these positive trends, overall growth is expected to wane due to mounting global trade tensions[3].
[1] International Monetary Fund (IMF) forecasts and analysis: IMF.org[2] CBI's Growth Indicator survey: CBI.org.uk[3] Sector-specific growth data: Office for National Statistics
The dismal business growth outlook highlights the need for innovative, sustainable economic strategies, such as expanding the Made Smarter Programme, delivering a National Tech Adoption Plan, and increasing incentives for occupational health, to counteract the predicted decline in business and professional services and consumer services.
Despite the robust business investment and a strong first quarter, global trade tensions could potentially diminish the UK's economic growth, causing uncertainties among private sector firms and potentially impacting the financial prospects of various businesses.
