Consumer Confidence Plummets Amid Economic Fears
Consumer confidence in Britain has taken a significant hit, with the latest GfK consumer confidence index dropping by seven points to -20 in September. This decline reflects growing anxieties among households about their personal finances and the overall economic outlook. The survey also revealed a 12-point drop in expectations for the economy over the next year, with the reading plunging to -27.
Several factors are contributing to this decline in confidence. The withdrawal of winter fuel payments, warnings of tough decisions ahead on tax, spending, and welfare, and the fear of increased taxes have all played a role. Businesses are also feeling the pinch, with both the Institute of Directors and the Confederation of British Industry reporting growing concerns over potential tax hikes in October's Budget. This fear has led many businesses to delay investment and hiring decisions, raising concerns that the government's approach could push the economy into recession.
City leaders and economists are urging Chancellor Rachel Reeves to offer a more positive outlook. They argue that pessimistic political messaging risks stifling the "animal spirits" needed for economic growth. Labour leader Sir Keir Starmer has acknowledged that conditions could worsen before they improve, warning of a "painful" Budget ahead. However, many believe that Labour's messaging is contributing to uncertainty and causing both consumer and business confidence to falter.
Households are showing more caution in their spending, with GfK's survey indicating a sharp drop in the willingness to make large purchases. This retrenchment is particularly evident among older generations, who are concerned about the future following the cancellation of the winter fuel payment.
Economists are critical of Labour's messaging, arguing that what is needed is a statement of confidence from the government, not constant warnings of hardship. Despite falling inflation and interest rates, which should typically boost household optimism, Labour's tone ahead of the Budget is weighing heavily on confidence.