UK consumer confidence weakens amid tax rise speculation

Times

4 days ago

Confidence among British consumers weakened this month, as speculation grew that Rachel Reeves may announce further tax rises in the autumn budget, a closely watched survey has found.
GfK's long-running consumer confidence index — a measure of how people view their personal finances and broader economic outlook — dipped by one point in July. The fall erased gains made over the previous two months and left the index standing at -19, which is below the long-run average of -10.
The savings index, which measures whether consumers feel it is a good time to save based on the economic environment, jumped seven points to 34. GfK said that this was the highest level since November 2007, around the time of the financial crisis, suggesting broader anxiety among people about the direction of the economy.
Neil Bellamy, consumer insights director at GfK, noted that while the savings index did not feed into the overall confidence score, it revealed that people 'are building contingency funds'.
The survey found no change in expectations for personal finances over the next 12 months, with the sub-index holding steady at 2. Responses were gathered between July 1 and July 15, just before the Office for National Statistics reported that inflation had unexpectedly risen to 3.6 per cent in June, the highest rate recorded since January last year.
Sentiment about the country's general economic situation over the past year has significantly worsened since last July. The GfK said the measure now stood at -44 — down from -32 a year ago — reflecting the period since the Labour government took office and pledged not to 'increase taxes on working people'.
Bellamy warned that people 'may be sensing stormy conditions ahead', as other key indicators in the survey suggested growing public uncertainty about whether the government could hold to its promise.
He said: 'The key measures on personal finances, the economy and purchase intentions are flat in July and many will conclude that consumers are in a cautious wait-and-see mood.
'With speculation growing over possible tax rises in the autumn budget and price pressure contributing not just to higher inflation already but also to the likelihood of worse inflation to come, the news is worrying.'
Expectations for the UK economy over the next 12 months also remained firmly in negative territory. That measure stood at -29, some 18 points lower than last July.
'It's difficult to see what will lift it [the overall index] meaningfully higher in the months to come. It has drifted quietly downwards over the past year and any fresh challenges or shocks could easily push confidence sharply lower,' Bellamy said.
Official figures released this month revealed that the UK economy contracted by 0.1 per cent in May. Reeves called the performance 'disappointing' as it marked the second consecutive monthly decline. However, the chancellor said she was 'determined to kick-start economic growth' and get more money into people's pockets.
Despite the overall downbeat outlook, the GfK survey, which started in the 1970s, found consumers were slightly more willing to spend on big-ticket items such as furniture or electrical goods. The big purchase index edged up one point from last month to -15.