The Zhitong Finance App learned that consumer confidence in the UK plummeted in October, and the sharp rise in fuel prices made families actually feel the impact on living costs brought about by the Middle East conflict. GfK said its consumer confidence index fell to -24, down 11 percentage points from September. Except during the pandemic, this is the biggest drop since the UK voted to leave the European Union in 2016.
This decline erased all of the improvements in British consumer confidence over the summer after Andy Burnham became prime minister and quickly announced to help families plagued by rising bills. Its Chancellor of the Exchequer John Healy is expected to announce further measures in next week's budget.
“The pace of this deterioration is shocking,” said Neil Bellamy, head of consumer insight at GfK. He added that consumers are currently under “relentless cost of living pressure, and the international context is an unresolved regional conflict.”
The investigation was conducted from October 1 to 14, during which time the spillover effects of the Iran war began to tighten household budgets.
Diesel prices surpassed £2 ($2.7) per litre for the first time, and households are beginning to accept the reality that energy bills may rise 25% in January. Interest rates on key mortgages are approaching 6%, and Bank of England officials have hinted that the first rate hike in more than three years may be implemented as early as November.
The GfK report contrasts with signs of resilience in the wider economy, showing that companies are currently taking the main supporting role, not consumers. Healy tried to keep tax increase remarks to a minimum before the October 28 budget to avoid another fall in consumer spending. He said, “Past speculations have caused real damage.”
The decline in confidence this month is comparable to that after the Brexit referendum. All confidence indicators tracked by GfK declined. Plans for large purchases have declined sharply, which is a worrying sign for retailers ahead of the critical holiday shopping season.
An increase in the willingness to save, which is not factored into the overall confidence score.
Confidence deteriorated across income groups. High-income consumers — the only group still able to keep spending on necessities — saw the biggest drop, with confidence falling 20 points to -7 in October.
According to an earlier survey by the British Retailers Association, households expect the economy to deteriorate over the next three months.
“No single major economic event has driven this decline, and weakness has spread across all income, age and gender groups; these findings are disruptive given the UK government's priority is economic growth,” Bellamy said.