Private sector activity outlook bleak as volumes fall again, says CBI

(Sharecast News) - Private sector firms in the UK saw another decline in activity over the past three months, with all sectors reporting falls in business volumes, according to a survey from the Confederation of British Industry (CBI). The CBI's latest Growth Indicator showed that a net -27% of firms reported a decline in volumes over the three months to February, worse than the -23% balance reported in the three months to January.

Looking ahead, service-sector firms widely expect business volumes to decrease in the three months to May, with the net balance coming out at -23%.

This meant that the proportion of firms with a weaker outlook outweighed those with more positive expectations - a trend that is now expected to extended into the fourth consecutive quarter.

The downbeat prediction was driven by an expected fall in business and professional services (-14%) and the weakest expectations for consumer services (-55%) since September 2022. Distribution sales are also expected to fall significantly (-24%).

However, manufacturers anticipated a return to growth, with a net +8% predicting a pick-up in volumes.

Alpesh Paleja, the CBI's deputy chief economist, said that while a brighter outlook in manufacturing offered "some glimmers of hope", the overall survey "paints a picture of a tough operating environment for businesses, with consumer-facing sectors faring particularly badly".

"We do expect some tailwinds to growth over the year ahead. Rising real incomes will hopefully give households more confidence to spend, giving some relief to the sectors suffering the most. But as our latest surveys highlight, more action is needed to rev up growth momentum."

Paleja said that private sector firms are calling for "long-awaited reforms" to government policies, like the apprenticeship levy, incentives for occupational health, or changes to business rates.