UK private sector growth outlook remains weak, says CBI growth indicator

Private sector growth expectations remain subdued heading into the third quarter of 2025, according to the latest CBI (Confederation of British Industry) Growth Indicator. Companies anticipate a continued fall in activity over the next three months, with a weighted balance of -18%, extending a persistent period of pessimism that began in late 2024.

While this figure marks a slight improvement from May, the data points to continued economic headwinds across the UK’s private sector.

The survey, which draws on responses from 742 firms across manufacturing, distribution, and services, indicates broad-based weakness in outlook:

Services sector activity is expected to decline by -14%, with business and professional services at -10% and consumer services down a significant -31%.
Distribution sales are forecast to fall sharply (-40%), the most negative reading since September 2022.
Manufacturing output is expected to dip only slightly, with a -5% balance.

The downbeat expectations follow continued contraction in private sector activity in the three months to June, with an overall fall of -26%, matching the pace of decline seen in May. All major sectors reported reduced activity.

Alpesh Paleja, Deputy Chief Economist at the CBI, said: “While negative expectations for activity have eased a little, our surveys still point to challenging conditions for businesses.

“Firms cite a very mixed picture on activity: while there are pockets of strength in the economy, it’s clear that sizeable headwinds to growth remain.

“Companies are still grappling with higher employment costs, cautious spending behaviour on the part of households, and increasing global uncertainty. The recent volatility in global oil prices is also one to keep an eye on, given its scope to exacerbate costs and inflationary pressure.”

The CBI’s monthly Services Sector Survey highlighted continued weakness:

Services volumes declined by -24% in the three months to June, marking eight consecutive quarters of decline.
Business and professional services fell by -20%, while consumer services saw a sharp drop of -43%.
Hiring intentions remain weak: business & professional services firms expect a -10% fall in headcount, while consumer services anticipate a -36% drop.

Despite the downturn, selling price expectations remain elevated, with firms expecting price increases of +24% for the next quarter, far above the historical average of +7%. Inflation expectations are +23% in business services and have risen to +29% in consumer services.

Paleja added that while the government’s Industrial Strategy addresses some of the immediate challenges, further policy clarity is essential:

“Firms – particularly those outside of the Strategy’s purview – will be looking for further certainty in the Autumn Budget to boost the UK’s overall competitive edge. This includes further clarity on when business will benefit from greater Growth and Skills Levy flexibility, and business rates reform.”