UK household confidence plunges to lowest under Starmer

[LONDON] The threat of surging inflation has knocked UK consumer confidence to the lowest level recorded under Keir Starmer’s Labour government. 

The British Retail Consortium said on Thursday (Mar 26) that its measure of expectations for the economy over the next three months plunged to minus 53 in March from minus 30 previously – the worst reading since the tracker began in March 2024.

UK households were already cautious with their spending before the US and Israel attacked Iran on Feb 28, and this data suggests people will tighten their belts even more in response to a spike in inflation caused by the war.

Drivers are feeling the effect of more expensive motor fuel since the conflict started, while experts warn gas and electricity bills will climb in the summer when the UK’s energy price cap is updated. 

A survey on Tuesday also showed higher costs are rapidly feeding through to businesses, particularly manufacturers who saw the biggest pick-up in input cost inflation since Black Wednesday in 1992. 

“Consumer confidence collapsed as the Middle East conflict raised the prospect of higher inflation in the months ahead,” said Helen Dickinson, chief executive of the BRC. “Just as the economy was beginning to turn a corner on inflation, the rise in global energy prices is particularly unwelcome for businesses and families.”

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The drop in confidence was most pronounced among the so-called “baby boomer” generation who are more reliant on their investments, which may have been hurt by turmoil in stock markets. The BRC survey also found that consumers’ expectations for their own personal finances in the coming months slipped to a record low.

Official figures on Wednesday showed inflation held steady at an 11-month low of 3 per cent in February but economists warn of a sharp pick-up in the coming months. The Bank of England expects prices at the pumps to drive inflation to 3.5 per cent in March and forecasters predict that price growth could rise to more than double the central bank’s 2 per cent target by the end of the year.

With household saving rates already historically high, the tumble in confidence could put renewed pressure on the economy at a time when the Labour government is trying to boost growth. The PM said on Wednesday that he will “put in place appropriate support” on household energy bills. BLOOMBERG