Private sector growth prospects freeze over this winter - CBI Growth Indicator

Private sector activity continued to fall in the three months to October (weighted balance of -7%, from -8% in September), with all three sectors reporting mild contractions, according to the latest Growth Indicator.

Services saw business volumes continued to fall at a broadly similar pace to last month (-7%), reflecting weaker activity in both business & professional services (-7%) and consumer services (-10%). Distribution sales (-7%) and manufacturing output (-6%) also declined in the quarter to October.

A continued downturn in services activity has yet to temper hiring intentions in the sector, with both business & professional services (+19%) and consumer services (+6%) firms anticipating headcount growth over the next three months. Selling prices in the services sector also look set to rise at a firm pace over the same period (+28%). Most notably, consumer services firms report the strongest price growth expectations since January 2023 (+50%).

Looking ahead, private sector activity is expected to remain stable over the next three months (0%). A return to growth in manufacturing (+15%) looks set to broadly offset another contraction in distribution (-13%), with activity in services expected to be broadly flat (-1%).

Alpesh Paleja, CBI Lead Economist, said:  

“October’s Growth Indicator signalled another contraction in private sector activity, with businesses having long been stifled by high costs, staff shortages, and febrile demand conditions. Firms largely expect activity to remain in the doldrums going into next year, though it’s encouraging that manufacturers are hopeful of a modest revival.

“Chronically weak activity underscores the scale of the challenge the Chancellor faces to break the UK’s low-growth cycle. Bold action to mobilise the workforce, streamline planning processes, and make full expensing for investment permanent, is crucial to boosting UK productivity. Without a clear and convincing commitment to sustainable growth, the Government’s ambitions to bolster public services and improve living standards will likely go unrealised.”