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CBI Warns Companies Facing Tough Choices Amid Labour’s Budget – London Business Update

The Confederation of British Industry (CBI) has issued a stark warning to private sector firms, painting a bleak picture of the upcoming months in the business landscape. According to the latest Growth Indicator released by the CBI, companies are bracing themselves for a challenging period ahead.

Private Sector Expectations

The report reveals that private sector firms are anticipating a significant decline in activity in the three months leading up to February 2025, with a weighted balance of -10%. This marks the first time this year that growth expectations have turned negative, signaling a shift in the economic climate.

Sector-Specific Projections

Within the private sector, the services industry is expected to bear the brunt of the downturn, with business volumes anticipated to decline by -13%. This decline is further exacerbated by projections in business & professional services (-7%) and consumer services (-33%), marking the weakest expectations in around two years. Additionally, distribution sales are also expected to fall by -20%, while manufacturers are the only sector anticipating a modest rise in output (+9%).

Expert Insights

Alpesh Paleja, CBI Interim Deputy Chief Economist, expressed concern over the bleak outlook for businesses. He highlighted the impact of the recent Budget announcements on firms, stating, “As we head into 2025, expectations for growth have taken a decisive turn for the worse. Our surveys suggest that anticipated activity was already weakening heading into the October Budget and the Chancellor’s announcements have left businesses with even more tough choices to make.”

Paleja also pointed out that firms are planning to reduce headcount, with hiring intentions at their weakest since the COVID-19 pandemic. This trend could be attributed to the impending rise in employer National Insurance Contributions (NICs) and the uprating in the National Living Wage. In response to these challenges, Paleja emphasized the need for government intervention to support the economy, including reforms in business rates, flexibility in the apprenticeship levy, and incentives to boost occupational health.

In the face of these uncertain times, businesses are bracing themselves for tough decisions ahead, as they navigate a challenging economic landscape. The CBI’s warning serves as a wake-up call for companies to adapt and strategize in the midst of changing market dynamics. As the business community grapples with these challenges, the need for swift government action and supportive policies becomes more critical than ever.