Budget jitters weigh heavily on UK private sector - CBI

(Sharecast News) - Growth expectations across the private sector weakened in November, a survey showed on Tuesday, stymied by ongoing economic headwinds and pre-Budget jitters. According to the latest growth indicator from the Confederation of British Industry, private sector firms expect activity to fall in the next three months, with the balance falling to -27 from -20 in October.

A weighted balance is the percentage of companies reporting an increase minus those reporting a decrease.

Firms from across the private sector, including retail and manufacturing, were similarly downbeat looking forward.

The pessimistic outlook coincided with a downturn in private sector activity in the three months to November.

The composite activity balance fell three points to -35, the lowest since August 2020.

Alpesh Paleja, CBI deputy chief economist, acknowledged that the upcoming Budget would have likely weighed heavily on respondents.

A total of 909 firms were surveyed between 24 October and 13 November. Traditionally, the Budget tends to be held at the end of October, but this year chancellor Rachel Reeves presented it a month later, on 26 November.

Paleja said: "Businesses tell us that much of the month passed in limbo ahead of [the Budget], with big discretionary spending and investment on hold.

"However, this only compounded the headwinds to growth that have been apparent throughout the year: cautious spending behaviour by households and clients makes demand conditions tepid, against a backdrop of persistent cost pressures for corporates.

"Stability is the precursor to growth. While last week's Budget is likely to add further costs to businesses, notably with the addition of National Insurance contributions to salary sacrifice contributions, the fiscal headroom created may provide some stability going forward."

The growth indicator is a composite index based on three of the CBI's long-running business surveys: industrial trends, covering manufacturing; distributive trends, which includes retail; and the services sector, which incorporates both professional and consumer services.