Consumer confidence in the UK fell by 11 percentage points in October to minus 24, marking the fastest decline outside the Covid pandemic since the 2016 Brexit vote, according to the latest barometer from data company GfK. The fall comes as the escalating economic damage from the war in the Middle East combines with existing cost of living pressures to squeeze households just days before Chancellor John Healey's first budget on Wednesday. GfK said the index last fell by this magnitude in a single month in July 2016 following the leave result in the EU referendum. The only larger monthly drop on record occurred in March 2020 after the start of the first UK lockdown, when the index fell by 25 points.
Neil Bellamy, consumer insights director at GfK, said the latest reading showed that "relentless cost-of-living pressures, against an international backdrop of unresolved regional conflicts that are themselves contributing to domestic inflation now at 3.5%, appear to have swept aside the nascent optimism we saw following the appointment of a new UK prime minister this summer." The confidence decline marks a sharp reversal from the summer months, when a "Burnham bounce" alongside England's World Cup performance and sunny weather had lifted consumer sentiment.
The deterioration in confidence reflects tangible pressures on household finances. Petrol and diesel prices have surged close to record highs, while energy bills have increased ahead of a difficult winter. Analysis by the Trades Union Congress shows that UK households have paid almost £14,000 on average in additional costs for mortgages, loans, energy and water bills over the past five years. Warnings suggest consumer energy bills could reach £2,000 a year from January for a typical household. According to GfK, the major purchase index fell by 14 points to minus 22 in October, suggesting consumers may cut back on spending to accommodate higher energy costs.
The timing compounds challenges for the chancellor. Official figures released on Wednesday showed headline inflation rose to 3.5% in September, higher than expected, while the government deficit came in at £24.5bn, worse than forecast. Healey has warned that the government has limited resources to intervene as the Middle East conflict has pushed the UK's borrowing costs to the highest level in decades. He has pledged to announce "breathing space" measures to support households in his budget statement.
Business confidence has also weakened. The CBI's latest Industrial Trends Survey showed investment intentions among manufacturing businesses remained subdued as cost pressures persisted in the three months to October, though manufacturing output is expected to stabilise in the coming quarter. Cameron Martin, senior economist at the CBI, called for the budget to cut business electricity costs, reduce labour costs and reform business rates to support investment and growth.
For UK households and businesses, the sharp drop in confidence signals an expectant squeeze on spending and investment as people prepare for higher energy bills and reduced financial flexibility over the coming months.