UK businesses finish year well but see slow start to 2018

Services, manufacturing and retail companies all enjoyed better growth in the last quarter of 2017, according to a survey from the CBI released on Thursday, though growth is expected to be very slow in the coming quarter.

A composite view of UK private sector businesses showed 19% more firms report a rise in output volumes for the three months to December, up from the +6% balance reported a month ago. This was the strongest business growth shown in the survey since 2015.

The CBI survey, which was conducted among 642 companies, found output growth across all sectors at a pace above their long-run averages.

But for the coming three months, a balance of firms expecting output growth was just +4%, with growth set to stall across the services sector and to slow in distribution and manufacturing. The forward-looking measure was +6% a month ago and +12% in October.

“Private sector firms are enjoying healthy activity levels as we approach the year end, but mediocre expectations for growth underline the ongoing challenges facing companies," said Anna Leach, the CBI's economics chief.

“Persistent cost pressures will ensure that inflation remains at a high level, perpetuating the squeeze on household spending, particularly impacting consumer-facing firms and retailers.”

The CBI's last services sector survey found volume growth accelerated in the fourth quarter, with growth in business & professional services picked up after three months of no growth, while consumer services volumes recovered after a sharp decline in the three months to November. The start of 2018 is expected to be held back as the consumer services sub-sector is seen facing a decline.