The UK economy is “headed for the worst of all worlds” as businesses expect a “steep decline” in activity early next year, according to the CBI (The Confederation of British Industry).
The CBI survey is the latest indicator that the economy is set for a gloomy start to the year. It comes as data published by the Office for National Statistics (ONS) shows the UK economy stagnated in the third quarter of 2024 (July-September).
The CBI’s indicator survey found that private sector companies expect to cut down on hiring and reduce output, and for prices to rise, in the first three months of 2025.
One of the key reasons cited for the gloomy forecast was the hit businesses took from the rise in National Insurance contributions (NICs) announced in the budget.
Alpesh Paleja, the CBI’s interim deputy chief economist, said: “There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer.
“Businesses continue to cite the impact of measures announced in the budget – particularly the rise in employer NICs – exacerbating an already tepid demand environment.”
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The survey shows that pessimism is shared across all sectors.
Business volumes in the services sector are anticipated to decline (-18 per cent), driven by predicted falls in both business and professional services (-13 per cent) and consumer services (-37 per cent).
Distribution sales are expected to fall steeply (-35 per cent), and manufacturers also anticipate output to fall (-31 per cent), with expectations at their weakest since May 2020.
The CBI’s poll, based on responses of 899 companies between 25 November and 12 December, also found expectations for economic growth were at their weakest since November 2022, following Liz Truss’s resignation as prime minister.
Data released earlier this month shows onsumers plan to spend more than a third (36%) of their Christmas budget at discount retailers such as Lidl and B&M.
