UK Confidence Sinks as Cost Pressures Hit Households
UK consumer confidence fell sharply in October as rising living costs and the economic fallout from the Middle East war squeezed households. GfK’s index…
Rising household bills have erased a summer lift in Britain’s consumer mood. The latest GfK survey found that relentless cost living pressures drove UK consumer confidence down 11 percentage points in October, to -24, just days before Chancellor John Healey’s first budget.
The fall was the sharpest outside the Covid pandemic since the 2016 Brexit vote, according to GfK. It signals a squeeze on spending as households face higher energy costs and petrol and diesel prices near record highs.
Consumers are pulling back. GfK’s major purchase index dropped 14 points to -22 in October, suggesting households may cut spending over the winter to make room for higher energy bills.
Households face another squeeze
GfK said the confidence index last fell by as much in a single month in July 2016, after the result of the EU referendum. Its largest-ever monthly fall was 25 points in March 2020, just after the first UK lockdown.
The October reading marks a sharp change from the summer. GfK had reported a “Burnham bounce”, alongside a strong World Cup run by the men’s England football team and sunny weather, as factors that lifted the mood in its monthly survey.
Neil Bellamy, consumer insights director at GfK, said: “Relentless cost-of-living pressures, against an international backdrop of unresolved regional conflicts that are themselves contributing to domestic inflation now at 3.5%, appear to have swept aside the nascent optimism we saw following the appointment of a new UK prime minister this summer.”
The Guardian reported that the unfolding war in the Middle East has added to the pressure on consumers and the government. Petrol and diesel prices have surged close to record highs, while energy bills have risen ahead of a difficult winter for households already dealing with years of price increases.
Over the past five years, UK households paid almost £14,000 on average in additional costs for mortgages, loans, energy and water bills, an analysis by the Trades Union Congress found.
The pressure is not limited to household budgets. Manufacturing investment intentions remained subdued in the three months to October, while the CBI said business cost pressures remained high. The group expects manufacturing output to stabilise in the next three months, according to its latest Industrial Trends Survey.
Budget challenge for Healey
Healey is due to deliver his tax and spending statement to the Commons on Wednesday. He has pledged to announce “breathing space” measures to ease pressure on households, but has also warned that the government has limited resources to intervene as the Middle East conflict pushes UK borrowing costs to their highest level in decades.
Households are weighing those pressures against warnings that energy bills could reach £2,000 a year from January for a typical household. That prospect helps explain why the major purchase index fell: consumers may defer spending to protect money for essential bills.
Official figures released on Wednesday showed headline inflation rose more than expected to 3.5% last month, while the government deficit was £24.5bn, worse than forecast. Both figures add to the financial strain facing the chancellor as confidence weakens.
Cameron Martin, senior economist at the CBI, said: “If the government wants to meaningfully tackle the cost of living, it must give manufacturers the breathing space to invest and dri”
Source: theguardian.com
