Consumer confidence dwindles in the UK

Print, digital and social news channels have been filled with doom and gloom over the past few weeks, as financial analysts and economic experts deliver their predictions for this September’s Autumn Budget.

Capital Gains Tax on householders, changing to IHT, and other measures the Treasury could be considering, have spooked consumers, experts say, with optimistic spending seen in the beginning of the summer, in response to the UK’s bright, warm weather, dipping.

Helen Dickinson, chief executive of the British Retail Consortium (BRC) said, “While consumer confidence in the economy crept up this month, it remains 24 points lower than a year ago, with older generations seeing the biggest falls. Full-time workers were far more optimistic than those working part-time, unemployed, or retirees, reflecting that they were also the only group who expected their financial position to improve in the next three months. With prices rising, and food inflation predicted to hit 6% by the end of the year, households are expected to spend more on retail goods in the coming months, with groceries showing the biggest increase.”

Helen said rising food inflation will make it increasing harder to lift consumer confidence “out of the doldrums”.

“Belief in the economy has stayed stubbornly below -30 for six of the last seven months, a far cry from the net positive sentiment in July 2024. Consumers see rising prices, gap-toothed high streets, and reports of large businesses falling into administration. Much rides on the Chancellor’s plans for retail, hospitality and leisure, and only a significant reduction in the business rates burden can bring about the levels of investment needed to reinvigorate Britain’s high streets and town centres.”

The latest CPI inflation figures show headline inflation rising to 3.8%, and food inflation rising to 4.9%, with households feeling the pinch as the cost of their weekly shop climbs.

Kris Hamer, director of insight at the BRC, said, “The Bank of England has been clear that government policies, which have driven up the costs of employment, are fuelling price rises at the till, while poor harvests and global instability have also added further cost pressures. There was some limited relief for consumers as clothing and footwear inflation remained subdued while certain everyday food items such as olive oil, butter and cheese did fall in price on the month.”

Retailers, Kris added, have been doing everything in their power to prevent price rises, but the swathe of costs they now face has left them no room to manoeuvre.

“The Chancellor must avoid burdening the industry with even more taxes this autumn. Instead, she has an opportunity to encourage much needed investment in our high streets by ensuring the planned reforms to business rates offer a significant reduction for retail properties, and leave no shop paying more.”

All eyes are now on the outcome of the budget and the impact it will have on consumers, retailers and the wider economy.