UK shoppers ready to spend big as confidence edges up, GfK says

BRITONS are more likely to buy big-ticket items than they were before Rachel Reeves’ budget, according to a prominent survey that suggests sentiment has improved in the run up to Christmas.

GfK’s indicator of major purchase intentions rose to minus 11 in December, up four points from November and the highest score since January 2022.

All the sentiment measures tracked by GfK, including consumers’ outlook for the economy and their own finances, improved from November when fears of tax rises in Labour’s budget weighed on confidence.

Neil Bellamy, consumer insights director at GfK, said the findings suggest “people decided to spend on Christmas regardless, and worry about 2026 later.”

GfK’s overall consumer confidence index rose two points to minus 17, matching the highest reading this year, even though the improvement only brings sentiment back to where it was in December 2024.

Still, the report will ease fears that consumers, who drive 60 per cent of economic activity, won’t spend over the crucial festive period, after months of warnings about the state of the economy before Reeves’ Nov 26 budget.

It chimes with a report from the British Retail Consortium showing sentiment improved in December after the budget turned out to be less damaging than feared.

The chancellor avoided raising income tax rates in her fiscal statement, opting to freeze thresholds instead. While this so-called stealth tax will drag millions into higher bands years down the line, it’s likely to go unnoticed in the short-run, providing some relief for households over the festive period. 

Consumers are crucial for Reeves’ fiscal balancing act. The chancellor’s plans hinge on households drawing down their savings and returning to shops and restaurants.

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According to the UK’s fiscal watchdog, weaker earnings and spending could blow a £40 billion (S$69.3 billion) hole in the public finances.

Weak household spending is becoming a growing problem for Bank of England policymakers. Rate-setters such as Dave Ramsden and Alan Taylor, who sided with the majority backing an interest-rate cut earlier on Thursday, highlighted low consumer confidence as a key risk to the growth outlook.

Intelligence gathered by the BOE’s network of agents also pointed to weakening demand, with Labour’s budget acting as a key factor holding back spending.

Consumers are less likely to make discretionary purchases and are buying fewer food items, while retailers rely on discounts to boost sales of Christmas food and drink, it said.

A separate BCG study showed consumers were more likely to report declines in disposable incomes in December, a sharp reversal from the situation at the start of the year. This suggests “people feel like they are getting poorer after taxes,” the report’s authors said. 

Deteriorating job prospects continue to sour the mood, even as cost-of-living pressures cool. The latest jobs figures showed unemployment nearing a five-year high and shrinking real wage gains.

“UK households still face cost-of-living pressures, despite the recent softening in inflation, along with rising economic uncertainty, and those conditions result in weaker consumer confidence,” Bellamy said. AFP