Britain's firms 'under pressure' as energy and tax hikes bite, CBI warns

Britain's economy remains 'under pressure', with no end in sight to the gloomy outlook for business under Labour, figures show.

According to latest findings from the Confederation of British Industry, firms across the private sector expect activity to fall in the three months to September.

That extends a run of pessimism that began in late 2024, when Labour began to hammer businesses with damaging policies such as National Insurance hikes, steep minimum wage rises and a raft of new workers’ rights.

Alpesh Paleja, the CBI’s deputy chief economist, said: ‘Weak demand, fragile confidence and persistent cost pressures still dominate the business landscape,’ and called for the next Prime Minister to prioritise long-term decisions such as delivering a long awaited defence spending plan and cutting energy costs for British industry.

It comes as a monthly business survey revealed last week that the private sector was on course to shrink for two months in a row.

Now firms must also contend with uncertainty in Westminster and fears that Andy Burnham, expected to take over as PM, could lurch to the Left.

Activity is expected to fall significantly in distribution, business and professional services and manufacturing, with predictions for growth in the latter worsening materially compared to recent months, the CBI said.

The subdued outlook emerged as private sector activity fell 34 per cent in the three months to June. All sub-sectors reported falling activity.

Consumer services firms expected only a slight decrease in business volumes, marking the least pessimistic expectations since August 2024.

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Hiring intentions within the services sector remained negative, extending the trend seen since late 2024.

The CBI said many business and professional services firms expected headcount to be cut in the three months to September, while consumer services expected an even sharper reduction.

Selling price expectations in the services sector eased for two consecutive months, falling back towards historical norms.

The CBI said: 'This reflects a paring back in expectations among both business & professional services firms (+5 per cent), and consumer services (+32 per cent), though expectations in the latter remained elevated.'

For the services sector as a whole, inflation expectations are now their weakest since November 2025, the CBI added.

Paleja said: 'The latest Growth Indicator is a reminder that amid shifting political sands at home, the economy needs to remain front and centre of policymakers’ focus.

'Businesses are looking for certainty, not delay. The next Prime Minister should focus on the long-term decisions that will strengthen confidence and unlock investment by publishing the Defence Investment Plan, making further progress on reducing industrial energy costs and strengthening the UK's trading relationship with the EU.'

Earlier this month the CBI said it expected UK unemployment to rise to 5.5 per cent this year, which would represent around two million people.

The Office for National Statistics (ONS) reported a jobless rate of 4.9 per cent over the three months to April, down from the 5 per cent level measured last month.