UK private sector contracts for eighth consecutive quarter

The UK’s private sector has shrunk for the eighth time in a row, a survey showed on Thursday, as services continued to falter.

The latest CBI monthly service sector survey showed that activity across the private sector as a whole fell in the three months to March, with a weighted balance of -4 compared to February’s -6. It is the eighth rolling quarter in which activity has fallen, although the decline was the mildest since July.

The decline was led by the service sector, with both business and professional services and consumer services both reporting weaker volumes, with balances of -5 and -11 respectively.

Distribution sales were largely flat, while manufacturing output contracted at a slower pace than seen in February, with the balance shrinking to -6 from -16.

There was, however, more optimism for the coming months. Private sector activity was forecast to return to growth with a balance of 5, the first positive growth expectations since April 2022.

Alpesh Paleja, lead economist at the CBI, said: "It’s encouraging that the private sector is expected to return to growth in the months ahead, chiming with a range of other data indicating some resilience in economic activity.

"But let’s be clear, at best this illustrates an economy skirting stagnation-like conditions rather than delivering the strong, sustainable growth we need."

He added that the UK continued to face "considerable economic headwinds", including "stubbornly high" inflation and under-pressure household budgets.

The monthly service sector survey was conducted between 28 February and 15 March, with 312 service sector firms responding.

A balance is the difference in percentage points between the weighted percentage of firms answering that output was up and those answering that it was down.