Chancellor’s tax hikes weakens private sector outlook – London Business News | Londonlovesbusiness.com

Private sector firms once again expect activity to fall in the three months to August (weighted balance of -30%), according to the CBI’s latest Growth Indicator.

Expectations have deteriorated further, and are now at their weakest since September 2022.

Business volumes in the services sector are expected to decline (-32%), with expectations at their weakest since November 2022.

The anticipated fall is driven by predictions of decline in both business & professional services (-29%) and consumer services (-43%) volumes.

Distribution sales are also expected to fall in the three months to August (-39%, also the weakest expectations since September 2022), alongside manufacturing output (-14%).

The negative outlook comes as private sector activity fell again in the three months to May (-26%, from -19% in April). The decline in activity was broad-based across all sectors.

Alpesh Paleja, Deputy Chief Economist, CBI, said, “There is little sign of summer cheer in our surveys, with private sector activity expected to remain subdued over the next three months. Our surveys were already pointing to weaker momentum than official data at the start of this year, and this sluggishness looks to have continued since.

“Firms highlight numerous headwinds: the continued impact of higher employer NICs and the National Living Wage hike on their costs and operations; further uncertainty from developments in the global trade landscape; compounded by a general sense of weak demand at home.

“Against this backdrop of uncertainty, private sector firms are looking to the government for decisive action to restore business confidence and boost growth. With the Spending Review and Industrial Strategy less than two weeks away, the government has a critical opportunity to drive innovation, investment and sustainable economic growth – through expanding the Made Smarter Programme, delivering a real National Tech Adoption Plan, reforming business rates, delivering flexibility around the Apprenticeship Levy and increasing incentives for occupational health.”