Private Sector Raises Alarm Over Tough Economy, Rising Unemployment, and Frugal Spending

UK Private‑Sector Forecast: Bracing for a Slow‑Down

According to the latest CBI Growth Indicator, firms across the private sector are expecting their activity to drop in a steady, “firm” manner over the three months ending September. The polite, industry‑wide estimate sits just below the 0‑point line at -18% – a signal that the economy remains on a mild decline.

What’s Driving the Downward Drift?

Services Sector: Forecasts predict a 14% contraction. Within this, business & professional services loom at a 10% slump, while consumer services are set to plummet by a staggering 31%.
Retail & Distribution: Distribution sales are projected to shrink by 40% – the steepest expectation recorded since September 2022.
Manufacturing: Slight dip – manufacturers anticipate an output drop of only 5%.

Why the Pessimism Persists

Private activity slid again in the three months through June, matching a -26% fall seen in May. The downturn is not limited to one part of the economy; it’s a cross‑sectional hiccup affecting every sector.

Deputy Chief Economist Alpesh Paleja weighed in: “While the gloom isn’t as heavy as May, the mood remains sour. We’re seeing pockets of strength, but big‑time headwinds keep the whole scene feeling sluggish.”

He listed three primary hurdles:

Higher wages pushing up costs.
Households holding back on spending.
A constantly shifting, uncertain global landscape – especially volatile oil prices that can jack up costs and feed inflation.

What Can Policymakers Do?

According to Paleja, the Industrial Strategy is tackling some of the immediate pain points, notably by aiming for competitive energy prices and easing talent access. Yet, many firms – especially those outside the strategy’s direct remit – are looking for clearer signals from the Autumn Budget. They want to know when they’ll get a bit more breathing room on the Growth and Skills Levy, and how business rates will be reformed, to keep the UK’s competitive edge sharp.