Zarah ChoudharyThe UK private sector is expecting significant job losses in the coming months, according to the Confederation of British Industry’s (CBI) latest Growth Indicator.
Business and professional services firms predict a 20% decline in headcount, while consumer services companies expect a sharper fall of 44%.
Private sector firms also anticipated another substantial fall in activity over the next three months, with a weighted balance of -22%.
These expectations are unchanged from December, which marked the weakest outlook in over two years.
The decline is forecast to be widespread.
Business volumes in the services sector are expected to fall by 20%, driven by a predicted 12% drop in business and professional services and a 49% fall in consumer services, the weakest expectations for the sector since September 2022.
Distribution sales are expected to decline by 30%, and manufacturers predict a 19% drop in output.
However, the outlook for manufacturing was less pessimistic than in December, when a 31% decline was forecast.
The latest figures came as private sector activity fell by 23% in the three months to January, following a similar 21% decline in the three months to December.
Business volumes in the services sector fell by 24% in the same period, with consumer services experiencing the sharpest decline in over two years.
Price growth expectations have accelerated, rising to 34% in January compared to 20% in December and well above the long-run average of 7%.
Inflation expectations for business and professional services rose to 33%, up from 13% in December, while consumer services firms reported broadly unchanged but elevated expectations at 40%.
Alpesh Paleja, interim deputy chief economist, CBI said: “After a grim lead-up to Christmas, the New Year hasn’t brought any sense of renewal, with businesses still expecting a significant fall in activity.
“Alongside plans to cut staff and raise prices further, this risks an increasingly awkward trade-off for policymakers.
“Anecdotes suggest that companies are being hit by lacklustre demand and caution among consumers, while also continuing to adjust to measures announced in the Budget.
“There is an urgent need to get momentum back into the economy.
“The Government can help shift the UK’s economic narrative with more determined focus on measures that could drive growth.
“Reforming the business rates system, implementing flexibility in the Apprenticeship Levy and supporting people to stay in work through expanding employer occupational health provision can help.
“With forecasts of underwhelming growth this year and less headroom for business investment, the way forward lies in the government and firms working together to deliver on their growth plan to restore confidence and get the economy firing on all cylinders.”
