Business leaders across the United Kingdom have issued a stark warning that the sharp downturn in the private sector is expected to continue well into the new year, likely persisting until Spring 2026.
Investment Freeze Ahead of Budget
The Confederation of British Industry (CBI) reports that private sector output is anticipated to fall in the fourth quarter of 2025. This decline follows a widespread decision by firms to put the brakes on major investments and hiring in the run-up to the Labour government's Autumn Budget. The CBI's latest growth indicator recorded private-sector activity at a concerning -34 per cent, reflecting that a majority of businesses reported a decline in activity over the previous three months.
Alpesh Paleja, the CBI's deputy chief economist, stated: "Uncertainty ahead of November’s budget put the brakes on key spending decisions and big projects, choking up pipelines of work. The latest growth indicator suggests that the alleviation of this uncertainty hasn’t materially boosted activity."
Tax Speculation Dampens Business Appetite
The downturn has been fuelled by heightened consumer caution and extensive speculation over potential tax changes. Many companies braced for significant tax adjustments, with concerns about being caught in Chancellor Rachel Reeves's so-called "smorgasbord" of tax rises. This climate of uncertainty directly suppressed business confidence and spending intentions.
The impact extended beyond investment, severely affecting the jobs market. Following the Budget, which included a £25bn increase in employers' national insurance contributions and a 6.7 per cent rise in the minimum wage, many firms hit pause on hiring. Recent data from the Office for National Statistics (ONS) shows the UK unemployment rate has jumped above the 5 per cent mark, with redundancies reaching their highest level since the pandemic.
Consumer Spending and Vacancies Feel the Pinch
This business caution has rippled through the wider economy. Job site Adzuna reported that vacancies fell by 6.4 per cent in November 2025 to 745,448. Andrew Hunter, Adzuna's co-founder, commented: "The latest contraction is yet further proof employers are erring on the side of caution, with the recent autumn Budget adding further uncertainty."
Consumer behaviour has also been subdued. Despite Black Friday promotions, ONS figures revealed retail sales declined by 0.1 per cent in November, following a 0.9 per cent fall in October. Households opted to hold back on spending ahead of Christmas, waiting to see the Budget's outcome. While there was a slight 0.6 per cent uptick compared to November 2024, sales volumes remain three per cent below pre-pandemic levels.
With pipelines of work stalled and hiring intentions weakened, businesses now predict this period of sluggish economic activity will extend into the early spring of 2026.
