Sharpest monthly fall since the Brexit referendum
British consumer confidence dropped by 11 percentage points in October to -24, the data company GfK reported, marking the steepest single-month decline since July 2016, when the country absorbed the shock of the EU referendum result. Outside the Covid period, it is the fastest deterioration recorded, and it lands less than a week before John Healey delivers his first budget.[S1][S2][S3]
GfK's index has been monitored by the government and the Bank of England for early signals about the economy since the early 1970s. Its largest one-month fall, of 25 points, came in March 2020, shortly after the first UK lockdown began. The October reading reverses the more upbeat mood of the summer, when GfK credited a Burnham bounce, England's World Cup run and warm weather with lifting sentiment.[S1]
War abroad feeds inflation and energy bills at home
Neil Bellamy, GfK's consumer insights director, attributed the decline to persistent cost-of-living strain set against unresolved regional conflicts abroad that are themselves feeding domestic inflation, now running at 3.5%. He said those forces appeared to have erased the early optimism that followed the appointment of a new prime minister this summer.[S1]
The war in the Middle East has pushed petrol and diesel prices close to record levels and raised energy bills ahead of a hard winter for households already squeezed by years of increases. Research by the Trades Union Congress found UK households have paid nearly £14,000 on average in extra mortgage, loan, energy and water costs over the past five years, and typical annual energy bills could reach £2,000 from January.[S1]
Pressure builds on the chancellor before Wednesday's statement
Healey has promised his Commons statement will include measures to give households breathing space, but he has also cautioned that the government has little fiscal room as the Middle East conflict drives UK borrowing costs to their highest in decades. Official figures this week showed inflation rising more than forecast to 3.5% and the deficit reaching a worse-than-expected £24.5bn.[S1]
Consumers grew gloomier about both their own finances and the wider British economy, and GfK's major purchase index fell 14 points to -22, suggesting households may cut spending this winter to absorb higher energy costs. A separate CBI survey found manufacturing investment intentions subdued over the three months to October, though output is expected to steady in the coming quarter. CBI senior economist Cameron Martin said the budget should lower business electricity costs, reduce labour costs and reform business rates.[S1]
