UK economy entering 2026 amid sharp private sector downturn, says CBI | Confederation of British Industry (CBI)
The UK will enter 2026 amid a sharp economic downturn in the private sector after companies “put the brakes on” investment and hiring ahead of the autumn budget, business leaders have warned.
Private sector output is on track to fall in the fourth quarter of 2025, the Confederation of British Industry (CBI) said in a bleak outlook after months of tax speculation.
The lobby group’s latest growth indicator showed a decline in activity across all sectors of the economy was reported in the three months to December, suggesting the budget had done little to improve bosses’ mood.
Separate figures from job site Adzuna showed that the number of job vacancies in the UK fell for the fifth consecutive month in November. The job site, which reported a 6.4% month-on-month decline in new openings, said 2025 is “one of the most challenging years for job seekers since the pandemic.”
The Chancellor’s tax and spending announcement on 26 November does not appear to have triggered optimism in the business community. According to CBI, private firms predict that economic activity will decline further in the next three months, and negative forecasts starting in late 2024 continue.
CBI deputy chief economist Alpesh Paleja said: “Uncertainty ahead of the November budget is putting the brakes on major spending decisions and major projects, clogging up the flow of business. The latest growth indicator shows that this reduction in uncertainty has not materially increased activity.”
“Our latest surveys round out a disappointing year for private sector growth, pointing to a continuation of the headwinds that have plagued businesses over the past 12 months: moderate demand conditions where households are cautious about spending and strong cost pressures that are squeezing margins.”
Rachel Reeves’ CBI snapshot, compiled from a survey of more than 900 companies between November 24 and December 11, budget week, revealed a broad-based downturn in the private sector.
The reading on the monthly growth indicator fell to -30% from -27% in November. The weighted balance score is the difference between the percentage of firms expecting activity to increase in the next three months and the percentage of respondents expecting a decrease.
The Bank of England warned last week that the UK economy was on track to record zero growth in the final three months of 2025 after output contracted unexpectedly in October as consumers held back on pre-budget spending.
Businesses are calling on the Labor government to work with industry to increase support for companies struggling with high energy costs, while also looking to simplify the tax system as part of ministers’ mission to boost economic growth.
Adzuna co-founder Andrew Hunter said the budget increased end-of-year uncertainty for employers.
He said: “2025 has been one of the most challenging environments for job seekers in almost every corner of the market, especially those entering the market for the first time. There is some light that growth in wages continues to outweigh the decline in vacancies.”
Adzuna data shows that the number of job vacancies in the UK fell by 15% in November compared to the same month the previous year, at a time when many employers typically hire extra staff for Christmas.
Official figures released this month show that the UK unemployment rate hit a four-year high of 5.1% in the three months to October.
Adzuna said postgraduate jobs had seen one of the sharpest declines in the last 12 months, representing an almost 45% annual decline in vacancies. Latest reports show that young people are being hit hard by the rise in unemployment.
Companies’ decision to reduce their workforce using artificial intelligence is seen as one of the reasons why vacancies in entry-level roles have decreased three years since the launch of ChatGPT.
But Adzuna found that wage growth continues to outpace inflation. The average advertised salary rose 7.7% year on year to £42,687 in November; public sector wages have grown almost twice as fast as those in the private sector. Salaries in the IT sector increased by 12.7% last year, making it the highest-paid sector.
