Private sector slump to drag on to Spring 2026, businesses say
UK business leaders have warned that the sharp downturn in the private sector is likely to continue until Spring 2026, after firms put plans for future investment on ice in the run-up to the Labour government’s Autumn Budget.
The Confederation of British Industry (CBI) anticipates private sector output to fall in the fourth quarter after businesses “put the brakes on” investments and hiring ahead of the Budget.
The CBI’s growth indicator recorded private-sector activity at -34 per cent, indicating the majority of businesses had told the lobby group athat ctivity had declined over the past three months.
This came amid heightened consumer caution over recent months, with tax speculation ahead of the Budget driving the downturn.
Companies predicted this sluggish period would extend into the early Spring.
The back-and-forth tax speculating dampened appetite across businesses, with many bracing for another hefty tax raid or expecting to get caught up in Rachel Reeves’ “smorgasbord” of tax rises.
Alpesh Paleja, deputy chief economist at the CBI, said: “Uncertainty ahead of November’s budget put the brakes on key spending decisions and big projects, choking up pipelines of work.
“The latest growth indicator suggests that the alleviation of this uncertainty hasn’t materially boosted activity.”
Businesses hit pause on hiring after Budget
Many firms’ hiring intentions have still been hit by Reeves’ first Budget, in which she launched a £25bn cash grab through employers’ national insurance contributions, which came alongside a 6.7 per cent hike to the minimum wage.
On Monday, jobs site Adzuna also released figures which showed vacancies fell by 6.4 per cent in November to 745,448.
Co-founder Andrew Hunter said: “The latest contraction is yet further proof employers are erring on the side of caution, with the recent autumn Budget adding further uncertainty as we head into the festive period.”
The UK unemployment rate jumped above the 5 per cent mark and redundancies surged to their highest level since the pandemic earlier this month, according to fresh data from the Office for National Statistics (ONS).
Last week, the ONS showed Black Friday sales failed to boost consumer spending in November, as Budget jitters kept spenders away from the high street.
Sales declined 0.1 per cent last month, following a 0.9 per cent fall in October, as households opted to hold off spending in the run up to Christmas and wait to see the outcome of the Budget.
While November did experience a 0.6 uptick compared to the prior year, sale volumes were still down by three per cent, compared to levels recorded pre-covid.