UK consumers are in a “despondent mood” as households brace for tax rises in the Budget next week, amid fears that Britain could be entering a “vibecession”, a situation of disconnect between the economy's performance and how people feel about their finances
Research firm GfK’s monthly survey of consumer morale shows confidence has slipped this month, to -21 points, the joint lowest this year. It found that households are gloomier about the general economic situation of the country during the last 12 months, and also over the next year.
Neil Bellamy, consumer insights director at GfK, reckons consumers are "holding their breath” ahead of next Wednesday’s budget statement.
He said, "The largest drop though was in our view of the general economic situation over the last 12 months, down five points to -42. On the plus side, the major purchase index rose two points and future personal financial expectations by one point. As the Budget statement looms, consumers are in a despondent mood despite a fall in the headline rate of inflation. This month’s Consumer Confidence Barometer paints a picture of people holding their breath to see what’s in store for them on 30th October.”
“Consumer confidence fell one point this month to -21, taking the score back down to the level last seen in March this year. Also falling one point are both personal financial situation over the last 12 months and general economic situation over the next 12 months.
Although Labour ruled out increasing taxes on “working people”, various revenue-raising measures could be in the chancellor’s sights, such as capital gains tax (CGT), inheritance tax, employer national insurance contributions, and fuel duty.
A similar picture was presented by PwC on Thursday (24), showing that consumer sentiment index dropped to the lowest level in 2024, led by “notable declines” among those over 65 and the lowest socioeconomic groups.
Over 70 per cent of people polled by PwC are planning to make short-term spending cutbacks, and more households plan to spend less on Christmas presents and celebrations than those who say they’ll spend more.
The drop in confidence comes despite the easing of cost of living pressures recently, with inflation dropping to 1.7 per cent last month.
