The UK's private sector is entering 2026 in the grip of a sharp economic downturn, according to a major business survey. The Confederation of British Industry (CBI) has issued a stark warning, revealing that companies slammed the brakes on investment and hiring in the lead-up to the autumn budget.
Business Activity Plummets Across the Board
The CBI's latest growth indicator, compiled from a survey of more than 900 companies between 24 November and 11 December 2025, paints a gloomy picture. It found that private sector output is on track to fall in the final quarter of the year. The survey's reading plunged to -30% in December, down from -27% in November, indicating a broad-based decline in activity across all sectors of the economy.
Alpesh Paleja, the CBI's deputy chief economist, stated that uncertainty ahead of Chancellor Rachel Reeves's budget on 26 November had critically hampered business decisions. "Uncertainty ahead of November’s budget put the brakes on key spending decisions and big projects, choking up pipelines of work," he said. "The latest growth indicator suggests that the alleviation of this uncertainty hasn’t materially boosted activity."
Job Market Slump Compounds Economic Gloom
Separate data from the jobs website Adzuna underscores the challenging environment, showing UK job vacancies shrank for a fifth consecutive month in November. Vacancies fell by 6.4% month-on-month and were down 15% compared to November 2024.
Andrew Hunter, co-founder of Adzuna, described 2025 as "one of the toughest years for jobseekers since the pandemic." The data revealed particularly sharp falls in graduate roles, with vacancies plummeting by almost 45% over the past 12 months. The rise in AI adoption for entry-level tasks is cited as one factor behind this decline.
Official figures align with this trend, showing the UK unemployment rate hit a four-year high of 5.1% in the three months to October.
Wage Growth Offers a Lone Silver Lining
Amid the downturn, one positive signal comes from wage growth. Adzuna's data shows advertised salaries continue to outpace inflation, with the average advertised salary rising 7.7% annually to £42,687 in November. Public-sector wage growth was nearly double that of the private sector, and IT sector salaries saw a significant 12.7% increase, making it the UK's best-paid sector.
However, this has not offset the wider economic concerns. The Bank of England has warned the economy is on track for zero growth in Q4 2025, after an unexpected contraction in October. Businesses are now urging the Labour government to provide more support, particularly with high energy costs, and to simplify the tax system to foster growth.
The CBI's survey rounds off a disappointing year, marking a continuation of the headwinds of tepid consumer demand and strong cost pressures that have squeezed business margins throughout 2025.
