Business activity in the UK private sector has continued to decline over the past three months, with companies struggling under the weight of weak consumer spending, according to a new survey by the Confederation of British Industry (CBI).
The CBI’s latest growth indicator revealed that private sector activity fell at an accelerated pace in the three months to February, compared to the previous quarter. All sectors reported a drop in business volumes, pushing the growth index down to -27% in February, from -23% in January.
Adding to concerns, businesses expect further declines in activity over the next three months, highlighting ongoing economic difficulties.
“There are some glimmers of hope in our latest surveys,” said Alpesh Paleja, CBI deputy chief economist. “Growth expectations have become marginally less negative, driven by a predicted return to growth in the manufacturing sector. But overall, the data still paints a picture of a tough operating environment for businesses, with consumer-facing sectors faring particularly badly.”
The CBI has urged the government to introduce measures to boost business confidence, including reforms to the apprenticeship levy, increased incentives for occupational health, and an overhaul of business rates.
Meanwhile, a separate survey by accountancy network BDO found that mid-sized companies are particularly concerned about obstacles to international expansion and rising workforce costs.
BDO’s poll of 500 business leaders from companies with turnovers between £10m and £300m found that nearly half wanted stronger government support for exporting. Suggested measures included broader access to UK Export Finance, new free trade agreements, and simplified customs rules.
In January, the European Union’s new trade chief suggested the UK could potentially join the Pan-Euro-Mediterranean convention, which could improve trade relations and provide benefits for the UK’s food and farming industry.
Rising workforce costs, such as national insurance contributions (NICs) and the living wage, were also cited as a major concern, with a quarter of business leaders highlighting them as a significant financial strain.
Despite growing pressure from businesses, the government has so far resisted calls to reverse the planned increase in employer NICs, set to take effect in April.
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