Consumer confidence in the UK has sharply declined amid rising concerns over economic stability.
- The latest GfK consumer confidence index showed a decrease of seven points, hitting -20.
- Concerns are growing over potential tax increases in the upcoming Budget, affecting both consumer and business sentiment.
- A decline in household spending willingness and business investment are key factors in the economic downturn.
- City leaders and economists have urged political figures to present a more optimistic economic outlook.
The GfK’s latest consumer confidence index reflects a significant drop of seven points to -20 in September, highlighting mounting anxieties over personal finances and the broader economic landscape. A notable 12-point decline has been recorded in economic expectations for the coming year, plunging to -27.
Neil Bellamy from GfK attributed the diminishing confidence to the withdrawal of winter fuel payments and impending difficult decisions on tax, spending, and welfare. Businesses share similar concerns, as organisations like the Institute of Directors and the Confederation of British Industry have reported fears over potential tax increases in the forthcoming Budget.
This apprehension around increased taxes has led to delays in business investments and hiring, fuelling worries that the current governmental approach might steer the economy towards a recession. Sir Philip Hampton, former chairman of Royal Bank of Scotland and Sainsbury’s, emphasised that pessimistic political rhetoric could suppress the ‘animal spirits’ crucial for economic growth.
Political leaders, including Labour’s Sir Keir Starmer, have signalled that economic conditions might deteriorate before improving, with Starmer indicating the possibility of a ‘painful’ Budget to come. Chancellor Rachel Reeves has pointed to a £22 billion gap in public finances, worsened by recent public sector pay rises.
Sir Martin Sorrell, executive chairman of S4 Capital, observed that Labour seems to be setting the stage for substantial tax hikes, adding to the uncertainty. This instability is reflected in households’ cautious spending behaviours, as evidenced by GfK’s findings of a drop in willingness to make significant purchases.
Bellamy noted that consumers are becoming more conservative, focusing on safeguarding their families amidst growing economic uncertainties. The elderly have been particularly affected, following the cessation of winter fuel payments, intensifying concerns among pensioners.
Economists like Jagjit Singh Chadha of the National Institute of Economic and Social Research have criticised Labour’s approach, arguing for a more confident governmental stance rather than continuous hardship warnings. Despite easing inflation and interest rates, which would typically enhance household optimism, Labour’s pre-Budget tone is seen as dampening confidence.
Consumer confidence continues to be undermined by economic uncertainty and political cautioning.
