Consumers are losing confidence in the UK’s economic prospects and considering tightening purse strings and saving money in the coming months, shows recent data.
Amid widespread warnings that businesses may have to cut staff and raise prices because of impending tax and wage rises, GfK’s long-running Consumer Confidence Index fell by five points to -22 in January – its lowest reading since since December 2023.
Neil Bellamy, Consumer Insights Director at NIQ GfK, noted that there were particularly steep falls in consumer views on the wider UK economy, both looking back a year and at what’s in store for the next 12 months.
“These figures underline that consumers are losing confidence in the UK’s economic prospects,” he said.
“While the Savings Index on motivation to save money is not included in the calculation of the Overall Index Score, it’s notable that it has leapt nine points in January to +30.
"This sharp increase is unwelcome because it’s another sign that people see dark days ahead and are therefore thinking of putting money aside for safety.”
Growth in the UK economy has slowed to a crawl in recent months, with the Bank of England now widely expected to cut interest rates on 6th February.
Separate data released recently showed that there has been an “unprecedented” rise in the number of businesses on the brink of insolvency.
The Red Flag Alert report by Begbies Traynor showed that the number of firms in critical financial distress rose by 50 per cent in the three months to December compared to June-August. It said that 46,583 businesses were clinging on, with consumer-facing firms, such as hospitality businesses, bearing the brunt of the deterioration.
The report pointed to pressures on many fronts, from rising energy costs, budget tax measures, high interest rates and weak consumer demand.
Julie Palmer, partner at Begbies Traynor, commented: “Across nearly every sector, there has been an unprecedented level of growth in the number of firms who are at serious risk of entering insolvency in the next 12 months.
"The fact that the distress is being felt across almost every corner of the economy highlights how difficult the outlook is for UK businesses right now.
“After a disappointing Christmas, consumer-facing industries, in particular, are feeling the strain, with rising operational costs and higher wages adding to an already difficult situation.
"With many such businesses already operating on thin margins, I fear the current situation will undoubtedly push some over the edge.
“Indeed, at a time when consumer confidence is so volatile and borrowing costs look likely to be structurally higher for the foreseeable future, the situation feels very precarious.
“Sadly, this has only been exacerbated by the tax rises and increase in national minimum wage levied on businesses during the October 2024 UK budget, which means the financial strain on businesses will only increase later this year.”
