British businesses are continuing to experience significant pressure, with the Confederation of British Industry (CBI) forecasting a further fall in private sector activity for the three months leading up to September. This outlook extends a period of pessimism that began in late 2024, influenced by policies such as National Insurance hikes, substantial minimum wage increases, and new worker protections.
Alpesh Paleja, the CBI's deputy chief economist, highlighted that "weak demand, fragile confidence and persistent cost pressures still dominate the business landscape." He urged the incoming Prime Minister to focus on crucial long-term decisions, including the finalization of a long-awaited defense spending plan and measures to reduce industrial energy costs.
Recent surveys indicate a contracting private sector, with activity falling 3.4 percent in the three months to June across all sub-sectors. While firms in the consumer services sector anticipate only a slight decrease in business volumes, marking the least pessimistic outlook since August 2024, hiring intentions across the services sector remain negative, a trend consistent since late 2024.
Several sectors are expected to see notable reductions in their workforce. Many firms in business and professional services anticipate headcount cuts in the next quarter, with consumer services expecting an even more significant decline. Selling price expectations in the services sector have eased for two consecutive months, moving closer to historical averages. Inflation expectations for the services sector are at their lowest since November 2025, according to the CBI.
Paleja emphasized the need for economic stability amidst political shifts, stating, "The economy needs to remain front and centre of policymakers’ focus." He called for certainty and prompt action from the next Prime Minister, specifically mentioning the need to publish the Defence Investment Plan, advance efforts to lower industrial energy costs, and strengthen the UK's trade relationship with the European Union.
The CBI previously projected a rise in UK unemployment to 5.5 percent this year, which would translate to approximately two million individuals. The Office for National Statistics reported a jobless rate of 4.9 percent for the three months to April, a decrease from the previous month's 5 percent.