British business pessimism deepens as CBI output outlook hits 2026 low

British firms turned more pessimistic about the next quarter as the Confederation of British Industry’s private-sector Growth Indicator fell to minus 28 for the three months to September from minus 24, its weakest reading since December 2025. The survey of 848 companies, conducted from May 26 to June 12, had more businesses expecting contraction than expansion, with the negative balance running since late 2024.

The downturn was broad-based. Services business volumes were expected to decline by 26% in the three months to September, while June data put output over the previous three months at minus 34 from minus 31 in May, the weakest since March. Within services, both consumer-facing and business services were under pressure.

The CBI’s June economic forecast put many firms freezing hiring or only replacing leavers selectively, and private-sector employment was expected to remain broadly flat as high labour costs and lacklustre demand weighed on staffing plans. A separate CBI/Pertemps update in June put unemployment down, inactivity up and vacancies further down, while Adzuna data had advertised vacancies rise for a fourth month even as advertised salaries fell 0.2% month on month. Salaries were still 3.8% higher than a year earlier, but graduate salaries were down 42% year on year, the sharpest fall on record in that series.

CBI industrial data for June showed manufacturing output falling to minus 33% in the three months to June, the weakest since August 2020, with manufacturers expecting another decline of minus 31% in the three months to September. Retail was even softer: the monthly sales balance dropped to minus 54 from minus 46 in May, and the three-month average to June hit minus 56, the lowest since records began in 1983.

The CBI cut its UK growth forecast, trimming GDP expectations to 1.1% for 2026 and 0.9% for 2027 from earlier projections of 1.3% and 1.5%. The downgrade reflected the economic fallout from the Iran conflict and higher energy prices. On June 4, Rain Newton-Smith warned the UK had the “makings of a true growth story,” but a record-high business tax burden was putting growth, jobs and investment at risk.