Private sector activity sees 7th consecutive rolling quarterly decline - CBI Growth Indicator

Private sector activity fell again in the three months to February (-6%), according to the CBI’s latest Growth Indicator, which means activity has now fallen for seven consecutive rolling quarters. However, the pace of decline has eased since January (-16%).

Over the last quarter, manufacturing output fell at the fastest pace since September 2020 (-16% from -1%). However, distribution sales fell more slowly (-7% from -13%) and services activity stabilised (-3% from -22% in January). Within the latter, business & professional services volumes were broadly unchanged (+1%), offsetting a decline in consumer services volumes (-18%).

Looking to the quarter ahead, private sector activity is expected to fall at a broadly similar pace over the next three months (-8%). Services business volumes look set to resume their downward trend (-8%), reflecting falling volumes in both business & professional services (-5%) and consumer services (-18%). Distribution sales are expected to decline for a fifth consecutive rolling quarter (-20%) and at a faster pace than over the last three months.

The only relative bright spot is in manufacturing, where output is expected to return to growth (+7%).

Alpesh Paleja, CBI Lead Economist, said:      

“Activity has now fallen for seven consecutive rolling quarters. While the pace of decline has eased, this still represents a tough operating environment for businesses. In particular, the cost-of-living squeeze is continuing to bite on consumer-facing sectors.

“In a fortnight’s time, the Spring Budget will give the Government an opportunity to take decisive action towards stimulating business investment and unlocking greater economic growth. Businesses are facing a double-whammy of the super-deduction expiring and a higher rate of corporation tax. Left unaddressed, this will make the UK a less attractive destination for investment at a time when growth prospects are already very weak, leaving the UK to fall further behind its global competitors.

“Despite the challenges, businesses haven’t given up on their growth ambitions for this year. Instead, they’re looking to the Government to match those ambitions: by introducing full capital expensing as a successor to the super-deduction, setting out its plan to address labour and skills shortages, and adopting a bolder approach to promoting green growth.”