Business leaders have warned that Britain is entering 2026 amid a sharp economic downturn in the private sector, after companies “put the brakes on” investment and hiring before the autumn budget.
In a gloomy snapshot after months of tax speculation, the Confederation of British Industry (CBI) said private sector output was on track to fall in the fourth quarter of 2025.
Suggesting the budget did little to brighten bosses’ moods, the lobby group’s latest growth indicator showed falling activity was reported across all sectors of the economy in the three months to December.
Separate figures from the jobs website Adzuna showed the number of UK job vacancies shrank in November for a fifth month running. Reporting a 6.4% month-on-month slide in new openings, the jobs website said 2025 had been “one of the toughest years for jobseekers since the pandemic”.
The chancellor’s tax and spending statement on 26 November does not appear to have kickstarted business optimism. According to the CBI, private firms are predicting economic activity will fall further in the next three months, continuing a run of negative forecasts that began in late 2024.
Alpesh Paleja, deputy chief economist at the CBI, said: “Uncertainty ahead of November’s budget put the brakes on key spending decisions and big projects, choking up pipelines of work. The latest growth indicator suggests that the alleviation of this uncertainty hasn’t materially boosted activity.
“Our latest surveys round off a disappointing year for private sector growth. They mark a continuation of the headwinds that have plagued businesses over the past 12 months: tepid demand conditions with households cautious around spending, and strong cost pressures squeezing margins.”
Compiled from a survey of more than 900 companies between 24 November – the week of Rachel Reeves’s budget – and 11 December, the CBI’s snapshot revealed a broad-based downturn across the private sector.
The reading on its monthly growth indicator fell to -30%, from -27% in November. The weighted balance score is the difference between the percentage of firms who expect activity to rise over the next three months and respondents anticipating a decline.
The Bank of England warned last week that Britain’s economy was on track to record zero growth in the final three months of 2025, after output unexpectedly shrank in October, with consumers holding back on spending before the budget.
Businesses are calling on the Labour government to work with industry to increase its support for companies grappling with high energy costs, while also working to simplify the tax system as part of ministers’ mission to boost economic growth.
Andrew Hunter, the co-founder of Adzuna, said the budget had added to end-of-year uncertainty for employers.
He said: “2025 has been one of the toughest environments for jobseekers across almost every corner of the market, particularly among people entering the market for the first time. One glimmer of light is that wage growth continues to counteract the vacancy slump.”
Adzuna data shows the number of UK job vacancies slid by 15% in November compared with the same month a year earlier, at a time when many employers would usually take on extra staff for Christmas.
Official figures released this month show the UK unemployment rate hit a four-year high of 5.1% in the three months to October.
Graduate jobs have seen one of the sharpest falls over the past 12 months, marking an annual slide in vacancies of almost 45%, Adzuna said. Recent reports have shown young people are being hit hard by the rise in unemployment.
The decision by companies to cut the size of their workforce by using artificial intelligence is seen as one of the reasons for the fall in vacancies in entry-level roles, three years on since the launch of ChatGPT.
However, wage growth continues to outpace inflation, Adzuna found. The average advertised salary rose by 7.7.% annually to reach £42,687 in November, with public-sector wages growing almost twice as fast as those in the private sector. Salaries in the IT sector have risen by 12.7% over the past year, making it the best-paid sector.
