The CBI, which claims to represent 170,000 firms, said its survey based on responses of 899 firms between 25 November and 12 December, found private sector businesses across all industries expected a “steep decline in activity” in the first three months in 2025.

“Expectations are now at their weakest in over two years,” said Alpesh Paleja, the CBI’s interim deputy chief economist.

A separate survey by the British Retail Consortium, which represents UK retailers ranging from Marks and Spencer to Tesco, suggested a “January spending squeeze on the horizon” for consumers.

It said “public confidence in the state of the economy took a nosedive” this month, according to its consumer sentiment survey.

“With sales growth unable to keep pace, retailers will have no choice but to raise prices or cut costs – closing stores and freezing recruitment,” said Helen Dickinson, chief executive of the BRC.