Consumer confidence has fallen sharply amid growing concerns that Labour’s rhetoric is fuelling economic concerns, raising the prospect of a slowdown in Britain.
GfK’s latest consumer confidence index fell seven points to -20 in September, with households increasingly worried about their personal finances and the general economic outlook. The survey also showed a 12-point drop in expectations for the economy over the coming year, with the reading falling to -27.
Neil Belme of GfK attributed the fall in confidence to “the withdrawal of winter fuel payments and warnings of difficult decisions ahead on tax, spending and social care.” Business confidence also fell, with both the Institute of Directors and the Confederation of British Industry reporting growing concerns about potential tax rises in the October Budget.
Fears of higher taxes have prompted many businesses to delay investment and hiring decisions, exacerbating concerns that the government’s approach could push the economy into recession.
City leaders and economists have called on Chancellor Rachel Reeves to offer a more positive outlook. Sir Philip Hampton, former chairman of Royal Bank of Scotland and Sainsbury’s, warned that dovish political messages could stifle the “animal spirit” needed for economic growth. “Political leadership needs to remind people that innovation and change are possible, even in the face of financial constraints,” he said. Telegraph.
Labour leader Sir Keir Starmer has admitted that conditions could get worse before they get better, warning of a “painful” Budget ahead. Reeves pointed to a £22bn gap in the public finances, exacerbated by recent public sector pay rises.
Sir Martin Sorrell, chief executive of S4 Capital, said Labour appeared to be “preparing us for big tax rises”, which was contributing to the uncertainty. He said the lack of economic stability was causing consumer and business confidence to fall.
Households are showing more caution in their spending, with the GfK survey indicating a sharp decline in the willingness to make large purchases. Belmi noted that consumers are “taking a step back,” focusing on protecting their families amid heightened economic uncertainty.
The impact was most acute among older generations, especially after the abolition of winter fuel payments, a move that increased concerns among pensioners about the future.
Economists, including Jagjit Singh Chadha of the National Institute of Economic and Social Research, have criticised Labour’s message. “What we need is a statement of confidence from the government, not constant warnings of hardship,” Chadha said.
Despite low inflation and interest rates, which would normally boost household optimism, Andrew Wishart, chief UK economist at Berenberg, suggested Labour’s tone ahead of the budget was weighing heavily on confidence.
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