Consumer confidence has taken a significant hit, igniting concerns over Labour’s economic approach. September saw a marked decline in household and business outlooks.
- GfK’s latest consumer confidence index dropped by seven points to -20 amid rising anxieties over personal finances.
- A 12-point drop in economic expectations for the next year was recorded, falling to -27.
- Business confidence has also dwindled due to fears of possible tax hikes in the forthcoming Budget.
- Sir Philip Hampton and other economists have urged the government to adopt a more positive economic narrative.
GfK’s latest consumer confidence index has dropped significantly, falling by seven points to -20 in September. This decline reflects increasing worries among households about their personal finances and the overall economic outlook. The survey highlighted a 12-point drop in expectations for the economy over the next year, resulting in a reading of -27. Neil Bellamy of GfK has attributed the waning confidence to “the withdrawal of winter fuel payments and warnings of tough decisions ahead on tax, spending, and welfare.”
Business confidence has mirrored this downward trend. Both the Institute of Directors and the Confederation of British Industry have reported escalating concerns regarding potential tax increases in the forthcoming October Budget. The apprehension surrounding increased taxes has led businesses to delay investment and hiring decisions, exacerbating fears that the government’s strategy could steer the economy into a recession.
City leaders and prominent economists have called on Chancellor Rachel Reeves to present a more favourable economic outlook. Sir Philip Hampton, former chairman of Royal Bank of Scotland and Sainsbury’s, cautioned that negative political messaging could stifle the “animal spirits” essential for economic growth. He remarked, “Political leadership should remind people that innovation and change are possible, even with financial constraints.”
Labour leader Sir Keir Starmer has acknowledged the likelihood of worsening conditions before any improvement, warning of a “painful” Budget ahead. Reeves has pointed to a £22 billion deficit in public finances, worsened by recent public sector pay hikes. Sir Martin Sorrell, executive chairman of S4 Capital, noted that Labour seems to be “preparing us for significant tax increases,” which is hurting confidence. He further stated that the current lack of economic stability is contributing to the decline in both consumer and business confidence.
The impact on households has been particularly pronounced, with GfK’s survey showing a sharp decline in the willingness to make large purchases. Bellamy observed that consumers are “retrenching,” focusing on protecting their families amid growing economic uncertainty. Older generations, especially, have been adversely affected by the cancellation of the winter fuel payment, heightening concerns among pensioners about their future.
Economists, including Jagjit Singh Chadha from the National Institute of Economic and Social Research, have criticised Labour’s messaging. Chadha commented, “What we need is a statement of confidence from the Government, not constant warnings of hardship.” Despite falling inflation and interest rates, which should typically boost household optimism, Andrew Wishart, senior UK economist at Berenberg, suggested that Labour’s tone ahead of the Budget is heavily impacting confidence.
Concerns over Labour’s economic policies have significantly impacted consumer and business confidence, necessitating a more optimistic outlook from the government.
