UK Businesses Grow More Pessimistic as Economic Outlook Weakens

28 June 2026

Confidence among British businesses has fallen to its lowest level of the year as companies across the manufacturing, retail, and services sectors brace for slower growth in the months ahead. A new survey from the Confederation of British Industry paints a cautious picture of the UK economy, with firms becoming increasingly concerned about weak demand, rising costs, and ongoing uncertainty surrounding the country's economic direction.

The latest figures show that business expectations for output over the next three months have deteriorated for a fifth consecutive survey. The Confederation of British Industry's expected output balance dropped to minus 28 in June from minus 24 in May, marking its weakest reading since December 2025. The decline reflects growing pessimism among companies that had hoped economic conditions would gradually improve during the first half of the year.

The survey found that confidence has weakened across almost every major part of the economy. Manufacturers continue struggling with subdued demand and slowing orders, retailers are experiencing reduced consumer spending, and service sector businesses have become increasingly cautious about future activity. Together, these industries account for the vast majority of Britain's economic output, making the widespread decline in confidence particularly significant.

Business leaders say several factors are contributing to the gloomy outlook. Rising operating costs remain a major challenge, while uncertainty surrounding government policy, global economic conditions, and consumer spending has made companies hesitant to invest or expand. Many firms are also facing pressure from higher employment costs and elevated borrowing expenses following the Bank of England's interest rate increases over recent years.

The latest survey follows several other indicators suggesting the UK economy is losing momentum. Recent purchasing managers' surveys have pointed to weakening activity in the services sector, while separate reports have shown manufacturing orders shrinking at their fastest pace since 2020. Retail sales have also remained under pressure as households continue adjusting to the higher cost of living despite inflation easing from previous peaks.

Economists note that business confidence often provides an early signal of future economic performance. When companies expect weaker demand, they frequently respond by delaying investment, reducing hiring plans, or slowing production. Those decisions can then contribute to broader economic weakness, creating a cycle that becomes difficult to reverse without stronger consumer confidence or supportive government policies.

Despite the gloomy outlook, there were a few encouraging signs. Separate employment data released this week showed job vacancies increasing for a fourth consecutive month, suggesting that parts of the labor market remain resilient even as overall business confidence declines. That resilience offers some hope that the economy may avoid a sharper downturn if employers continue recruiting despite weaker growth expectations.

The Confederation of British Industry believes businesses need greater economic certainty to regain confidence. Company leaders have repeatedly called for policies that encourage investment, reduce unnecessary costs, and provide long term stability. Many executives argue that clear government strategies on taxation, infrastructure, and energy would help firms plan more effectively and restore confidence after months of economic uncertainty.

Global conditions have also added to the challenges facing British companies. Ongoing geopolitical tensions, fluctuating energy prices, and slower international growth continue affecting exports and supply chains. Although some pressures have eased compared with earlier in the year, businesses remain cautious about how global developments could influence domestic demand during the second half of 2026.

Financial markets are closely watching these business surveys because they often influence expectations about future economic growth and interest rate policy. If business activity continues slowing, investors may increasingly speculate that the Bank of England could eventually consider lowering interest rates to support the economy. At the same time, policymakers must balance any desire to stimulate growth with the need to ensure inflation remains under control.

For many business owners, however, the focus remains on navigating everyday challenges. Rising operating expenses, cautious consumers, and uncertain economic conditions have forced companies to become more selective about hiring, investment, and expansion. While many remain optimistic about their long term prospects, the immediate outlook has become noticeably more cautious.

The latest survey serves as another reminder that Britain's economic recovery remains fragile. Although unemployment has remained relatively stable and some sectors continue performing well, overall business sentiment suggests that companies are preparing for slower growth rather than a rapid rebound.

Whether confidence improves during the coming months will depend largely on how inflation, interest rates, consumer spending, and government policy evolve. Until clearer signs of sustained economic improvement emerge, many UK businesses appear content to take a cautious approach while waiting for stronger evidence that better conditions lie ahead.