BUSINESSES say the economy is heading for another slump and warn things could get worse on Labour’s watch.
Firms expect activity across the economy to fall again in the next three months, with a balance of -20 per cent predicting a drop, according to a new CBI report.
Companies say they are being squeezed by rising costs – including last year’s hikes in employer National Insurance and the National Living Wage.
Businesses have also paused key decisions because of fears over more tax changes in this year’s Autumn Budget.
CBI Deputy Chief Economist Alpesh Paleja said the UK had “not experienced a strong start to 2026”, warning weak growth and rising costs risk a “further squeezing of margins and dampening investment”.
He urged ministers to lower energy bills and cut red tape to help firms get back on track.
The services sector, the backbone of the economy, is braced for a -16 per cent hit to business volumes, including a huge -38 per cent fall for consumer services like hospitality.
High street and wholesale firms expect sales to tumble -37 per cent, while manufacturers predict another -14 per cent drop in output – though pessimism has eased slightly for the second month in a row.
It comes after a bleak winter where activity already fell by -33 per cent in the three months to January, with every major part of the economy shrinking.
A Treasury spokesperson said: “The OBR, Bank of England, IMF, OECD, and now the CBI, have all upgraded their growth forecasts for the UK – we will continue to defy the forecasts.
“We are reforming regulations to cut costs for businesses and The Chancellor’s Budget will drive economic growth through billions of pounds protected for new investment, better conditions for start-ups to scale and grow, and lower inflation to support rate cuts and spur business confidence.”
