Private sector business growth slows in first quarter of 2018

Growth in the UK’s private sector slowed in the three months to March, according to the latest CBI Growth Indicator.

The survey of businesses across the distribution, manufacturing and service sectors, showed the balance of firms reporting a rise in output at +8 per cent, down from +20 per cent in the three months to February.

The slowdown in growth was driven by the services and manufacturing sectors. Although growth in the distribution sector was broadly unchanged, retail sales volumes were flat, continuing the pattern of stagnant or falling sales volumes since October last year.

Looking ahead, the pace of growth is expected to accelerate over the three months to June, underpinned by a pick-up in retail and services volumes, coupled with firm growth across all other sub-sectors.

During this year and next, the CBI expects conditions to remain challenging for consumer-facing companies and retailers, as higher inflation and slow wage growth continue to squeeze household budgets.

Meanwhile, manufacturers should continue to benefit from the lower level of sterling and solid global economic growth. Please see the CBI’s December 2017 economic forecast for further details.

Rain Newton-Smith, CBI Chief Economist, said: “Slower growth underlines the challenges we’re seeing in consumer-facing sectors, which are most exposed to the squeeze on household budgets. Growth in manufacturing has also lost some steam compared with recent highs.

“Firms will welcome the agreement of a transition period with the EU, which will provide many hundreds of businesses with the confidence to put their contingency planning on hold and keep investing in the UK.

“Yet uncertainty remains, so it’s vital the Government provides the best environment for enterprise by partnering with business on industrial strategy, and fixing the apprenticeship levy to make it easier for firms to deliver high quality training.”