UK private sector tentatively optimistic as economy stabilises - CBI

Private sector activity stabilised in May, industry research showed on Monday, with further growth forecast for the months ahead.

According to the latest Growth Indicator from the Confederation of British Industry, private sector activity had a weighted balance of 2 in the three months to May, up from -14 in April. The balance was the firmest outturn since July 2022.

Driving the improvement were services business volumes, with a balance of -1 compared to -21 in April.

Distribution sales also showed their best reading for over a year, however, rising to 1 from -10.

Expectations for growth over the next three months had a balance of 7, although that was marginally down on April’s balance.

Respondents across all three sub-sectors - distribution, manufacturing and services - indicated they expect to see modest growth in the coming months. Hiring intentions were also positive.

Alpesh Paleja, lead economist at the CBI, said: "After such a prolonged period of subdued activity, it’s encouraging to see things start to stabilise across the private sector.

"That expectations for growth remain positive should give further reassurance that things are heading in the right direction."

However, he noted that the recovery remained in its early stages, and warned that some firms - especially in consumer-facing sectors - were continuing to struggle.

"With a date now set for a general election, we need all parties setting out clear policies to reduce business costs, attract investment and deliver a return to long-term sustainable growth," Paleja said.

A total of 682 firms responded between 25 April and 15 May. The Growth Indicator is a composite measure of activity based on responses to CBI surveys.

A balance is the weighted percentage of companies reporting an increase minus those reporting a decrease.