A sharp decline in retail sales and persistent cost pressures are set to deepen the private sector downturn across the UK, with the North’s industrial heartlands expected to feel the impact acutely.

According to the latest national CBI Growth Indicator, British private sector activity is projected to contract through July. This extends a period of negative sentiment that has persisted since late 2024, with business expectations now at their weakest in four months.

Retail Conditions "Darken" Nationally
The retail sector, a vital employer across Northern towns and cities, saw conditions "darken" significantly in April. Sales volumes fell at a steep pace compared to the previous year, as weak consumer confidence continues to stifle household spending.

Key findings from the Distributive Trades Survey include:

Online Sales Slump: Internet sales declined at their fastest rate since early 2024.
Wholesale Downturn: Wholesalers reported a quick fall in volumes, citing increased cost pressures as the main headwind.
Stock Surplus: Retailers are currently holding elevated stock levels relative to their expected sales for the coming month.

Manufacturing and Regional Headwinds
While the figures reflect a national cooling, they carry a particular sting for the North’s manufacturing hubs. Manufacturing output—a cornerstone of the North East, Lancashire, and Cumbria—fell at an accelerated pace in the three months to April. The decline was broad-based, hitting 14 out of 17 sub-sectors, including chemicals and food and drink.

Business’ expectations for activity have weakened further, as companies continue to grapple with uneven trading conditions, strong cost pressures and renewed uncertainty. These challenges have been exacerbated by the conflict in the Middle East, which is increasingly hitting a broad swathe of UK businesses.

Mitigating a further weakening of business sentiment requires the government to work with business to find appropriate landing zones on the Employment Rights Act, delivering meaningful reform of a business rates system that is holding back investment, and further exploring how to take additional policy costs off business energy bills.

The Outlook for May
A rare bright spot appeared in the motor trades, which saw sales volumes recover in April for the first time in nearly a year. However, the CBI warns this recovery is likely short-lived, with traders anticipating a return to moderate declines in May.

Across the wider private sector, the labour market continues to soften. National unemployment rose to 4.9% in the three months to February, while job vacancies have fallen consistently for over three years.