Business Outlook Report
Key Findings:
Services and manufacturing firms plans to shed staff over the coming year.
Construction sector registers mild uplift in growth forecast.
UK firms expect a softer increase in business activity over the next 12 months
Rising cost burdens and concerns about weak demand sent projections for output growth tumbling in February. The net balance for business activity expectations dropped to +25% in February, from +41% last October. This marks the lowest confidence in future output since October 2022, although it still suggests that UK firms expect activity to increase over the next year.
Overall, 45% of firms forecast a rise in output over the next 12 months, while 20% of companies expect a fall.
The UK was an outlier compared to the trend seen for most countries monitored by the business outlook survey. A sharp decline in activity expectations contrasted with a mild improvement globally, in the US and the eurozone.
Both the manufacturing and services industries in the UK demonstrated a much lower degree of activity growth optimism +25 during February. The net balance in the manufacturing sector fell from +43% in the previous survey to +29%, while the respective balance for services dropped from +41% to +24%. Both readings were the lowest recorded since October 2022.
According to qualitative reports, UK firms face a number of challenges over the next 12 months. These include rising employment costs, economic uncertainty exacerbated by geopolitical tensions and trade tariffs, and inflationary pressures on raw materials and energy costs.
That said, survey respondents did highlight some avenues for growth, such as greater investment into automation and technology, expanding into international markets such as Asia and the Middle East, and diversifying product and service offerings. Many firms also expressed confidence in a pick up in consumer spending.