London, UK – December 22, 2025 – The United Kingdom’s economy is entering 2026 facing a significant private sector downturn. This trend is widely expected to persist. The Confederation of British Industry (CBI) released a stark report today. It highlights broad-based declines across all business sectors. This news comes as a blow to economic confidence.
Activity Falls Sharply
The CBI’s latest Growth Indicator paints a grim picture. It shows private sector activity has fallen for three consecutive months. The latest reading registered a weighted balance of -34%. This indicates a significant majority of businesses reported declining activity. Furthermore, firms anticipate this sluggishness will continue. They expect trading conditions to remain weak until at least Spring 2026. This marks a continuation of negative predictions. These forecasts began in late 2024.
Uncertainty Damps Investment
Business leaders point to several key factors. Uncertainty ahead of the November Autumn Budget significantly impacted decisions. Firms put the brakes on investment and hiring. Many key spending decisions were delayed. This speculation choked up pipelines of work. Consequently, companies are hesitant to commit to new projects. The alleviation of this uncertainty has not yet boosted activity. This is a crucial finding for the United Kingdom’s business landscape.
Persistent Headwinds Plague Firms
Beyond the budget uncertainty, other headwinds persist. Tepid demand conditions are a major concern. Households remain cautious about spending. This impacts sales volumes across various sectors. Additionally, strong cost pressures are squeezing business margins. Elevated labour costs, including recent increases in National Insurance Contributions and the National Living Wage, are a burden. Energy costs also remain a significant factor. These combined pressures make growth difficult.
Job Market Feels the Strain
The downturn is also affecting the job market. Hiring intentions have worsened significantly. Business & professional services firms expect headcount to fall. Consumer services firms anticipate a sharp drop in employment numbers. Separate data from the jobs website Adzuna confirms this trend. UK job vacancies shrank for a fifth month running in November. The year 2025 has been one of the toughest for jobseekers. This business news highlights a contracting labor market.
Economic Outlook Remains Subdued
GDP growth forecasts for 2026 suggest a modest recovery. However, these figures mask deeper issues. The CBI projects GDP growth of 1.3% for 2026. This is an upgrade from previous forecasts. It is largely driven by temporary government spending boosts. Yet, underlying private sector demand remains weak. Business investment is expected to stay subdued. This is due to weak demand, high costs, and uncertainty. Some analysts project slower growth. For example, KPMG UK forecasts 1.0% GDP growth for 2026. The overall economic outlook remains challenging.
Expert Commentary and Future Steps
Alpesh Paleja, CBI Deputy Chief Economist, stated, “Our latest surveys round off a disappointing year for private sector growth.” He added, “They mark a continuation of the headwinds that have plagued businesses over the past 12 months.” Louise Hellem, CBI Chief Economist, noted that “persistent headwinds” continue to affect the economy. Businesses are looking for tangible policy support in 2026. They need simplification of the tax system. They also need broader industrial energy cost support. The Office for Budget Responsibility (OBR) will publish its next interim economic forecast on March 3, 2026. This will provide further insights into the economic trajectory. The current trending narrative suggests a cautious start to the year.
