Activity in the UK private sector is forecast to decline over the coming months, though firms in business and professional services are anticipating their strongest quarter since October 2024, according to a report released Monday by the Confederation of British Industry (CBI).
The CBI’s latest monthly growth indicator recorded a weighted balance of -13 per cent, signalling an expected contraction in overall activity. Declining sales in the distribution sector and a slowdown in manufacturing output were cited as key drivers of the anticipated slump. A drop in business volumes within the services sector, particularly those reliant on consumer spending, is likewise contributing to the negative outlook.
However, the report highlighted a notable divergence within the broader economic picture. Expectations for activity within business and professional services firms – encompassing consultancies, financial advisors, and related businesses – showed significant improvement, marking the most positive data since late 2024. This suggests a degree of resilience, particularly within the City of London.
Charlotte Dendy, the CBI’s economic surveys manager, described the improvement in business sentiment as “notable,” despite remaining below long-run averages. “Businesses continue to highlight the impact of recent Budgets on costs, alongside weak customer confidence and a broader lack of demand indicating that the mood remains fragile,” Dendy said. She urged the Chancellor to prioritize growth initiatives in the upcoming Spring Forecast, focusing on lowering business energy costs and ensuring the effective implementation of the Employment Rights Act.
The survey also indicated further planned headcount reductions in the three months to May, partly attributed to the impact of workers’ rights reforms contained within the Employment Rights Act. While the CBI and other industry groups successfully negotiated the removal of ‘day one’ unfair dismissal rights, other reforms – including expanded powers for unions to organise strikes and enhanced sick pay guarantees – are expected to increase regulatory costs for businesses.
Consultations on key aspects of the bill, including provisions related to maternity leave and trade union membership, are scheduled to open in February. The City of London Corporation agreed in 2024 to renew its membership of the CBI at a cost of £33,075 for the year, subject to ongoing monitoring by its Communications and Corporate Affairs Sub-Committee, according to minutes from a Policy and Resources Committee meeting.
The CBI itself has been navigating financial challenges, recently engaging in discussions to sublet portions of its London headquarters as part of cost-cutting measures following a period of crisis in 2024 triggered by a sexual misconduct scandal and subsequent loss of members. Despite regaining some influence with government officials, the organization’s finances remain precarious, relying on a multimillion-pound overdraft from several high street banks.
The Greater London Authority, under the next mayor, is being urged by the CBI to maximise devolved powers to work towards achieving net-zero carbon emissions for London by 2030, including maintaining the expanded Ultra Low Emission Zone.
