UK consumer sentiment weakens as concerns over tax hikes grow prior to Labour’s Budget.
- Chancellor Rachel Reeves is preparing for significant fiscal adjustments.
- GfK’s survey indicates heightened economic apprehension among households.
- Consumer confidence index declines, reflecting anxiety over potential changes.
- Inflation and GDP positives overshadowed by fiscal tightening expectations.
The latest data reveals a dip in UK consumer confidence, highlighting the apprehension surrounding Labour’s forthcoming Budget. This downturn is driven by concerns over potential tax increases anticipated in Chancellor Rachel Reeves’ financial plan. The GfK consumer confidence index fell by one point to -21, marking its lowest level since March, underscoring the challenges facing the government in boosting economic optimism since Labour assumed power in July.
Households are bracing for substantial changes, with tax increases of approximately £40 billion expected. Possible measures such as applying National Insurance to employers’ pension contributions and capital gains tax hikes have intensified consumer anxiety. Neil Bellamy, GfK’s consumer insights director, notes that despite declines in inflation, “As the Budget statement looms, consumers are in a despondent mood.” This sentiment reflects the overshadowing impact of the anticipated fiscal tightening on positive economic indicators.
The assessment of the country’s economic environment shows a similar pattern, as the general economic situation index also dropped by a point to -28. This decrease signifies continuing unease despite some optimistic signs such as the IMF’s upward revision of UK GDP growth projections from 0.7% to 1.1%. Additionally, inflation rates fell to 1.7% in September, the lowest in three years, fostering hopes of potential interest rate cuts by the Bank of England by year-end.
Despite these economic positives, GfK’s major purchase index saw a slight increase, gaining two points to -21. This suggests a readiness amongst some consumers to invest in significant purchases if interest rates decrease as anticipated. On the other hand, the savings index rose by four points to +27, highlighting a cautious approach to spending and a preference for saving amid prevailing economic uncertainties.
The latest figures underscore a cautious UK consumer sentiment, overshadowed by fiscal concerns and anticipated economic adjustments.
