Private sector growth remains strong, but two-speed recovery a concern - CBI Growth Indicator

In the three months to June, private sector activity across the economy grew at the fastest pace since May 2015 – with a balance of +32%, marking similar growth to last month (+30%). That’s according to the CBI’s latest monthly Growth Indicator.

Manufacturing and distribution activity grew at record rates (+37% and +60% respectively), while growth in business and professional services remained strong – although somewhat slower than the previous month (+38% from +50%). Conversely, consumer services activity continued to fall, but at an even sharper pace (-34% from -19%).

Private sector growth is expected to cool slightly over the next three months (+28%), albeit remain strong, with growth in the manufacturing and distribution sectors set to slow (+33% and +40% respectively). Business and professional services expect a similar pace of growth (+39%), while consumer services are set to see a slight easing in the pace of decline (-30%).

The composite measure featured responses from 590 firms between 25 May and 14 June. For a more complete analysis of the UK economic outlook, read the CBI’s latest forecast here.

Alpesh Paleja, CBI Lead Economist, said:

“With much of the economy having now reopened, we’re seeing a boost in activity across the economy. With robust expectations for the months ahead, and real positivity in terms of vaccine uptake, CBI forecasts show that UK GDP is on course to return to pre-Covid levels by the end of the year.

“Where we need to remain vigilant is the emergence of a two-speed recovery. While sectors like manufacturing, distribution and business & professional services look well on the road to recovery, consumer services firms – particularly those in international travel, where the government must show more urgency to implement a truly risk-based system. And greater support is now needed for the travel industry to prevent the loss of skilled jobs, protecting the UK’s long-term global competitiveness.”