UK retail and private sector slowdown

In late July, the Confederation of British Industry (CBI) reported that British retailers saw the smallest sales decline in six months, with the distributive trades balance improving significantly and forecasts for August sales turning positive. The CBI linked this modest easing to seasonal demand and a heat wave, while noting that recovery remained distant due to ongoing cost pressures and hopes for policy support from the new prime minister.

A few days later, the CBI’s Growth Indicator showed the weighted balance of private‑sector activity expected to fall by 18% in the three months to October—the least negative reading since March. The decline slowed across business services, consumer services, manufacturing and distribution, the latter posting its mildest drop since August 2025. The report cited subdued demand, weak confidence, and persistent cost pressures, with renewed Middle‑East tensions adding a further headwind. Both snapshots underscore a floor forming in the UK economy, but stress that lasting growth will require lower business costs, faster delivery and greater private investment.

However, the retail sector faced a setback in August as the CBI Distributive Trades Survey recorded a sharp decline in sales volumes. The headline sales volume balance fell to -48, down from -26 in July, marking a two-month low. Retailers reported that sales were well below normal seasonal levels, which has negatively impacted business sentiment and weighed on investment and hiring plans. Despite this contraction, there are signs of cautious optimism for September, with firms forecasting sales expectations to improve to -22, the strongest outlook since March. Additionally, while retailers still plan to reduce capital expenditure over the next 12 months, the intended cutbacks are the smallest seen since early 2024.