𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Consumer confidence in the UK economy has plunged over concerns about the “twin threat” of rising prices and a lack of economic growth in the fallout from the Iran war.

The consumer confidence index, provided by global market research firm Growth from Knowledge (GfK), the longest-running survey of its kind in Britain, shows a two-point drop to minus-21, indicating people expect more price rises to come.

It is back to the level last seen in April of last year, when inflation was still riding high, and a fresh wave of price increases hit households across energy, internet and other bills.

Neil Bellamy, consumer insights director at GfK, said: “A ripple of fear is spreading as is evident from the six-point fall in perceptions of the general economic situation over the next 12 months, and also in the four-point drop in the major purchase index.”

The war on Iran has pushed up the price of oil and gas, which has threatened to send energy bills soaring after the price cap ends in the summer and increase the cost of production, transport and even food.

As rising prices mean a return to inflation, swap rates – expectations of future interest rate rises – have increased, which has sent mortgage deals higher too, presenting new cost pressures to UK households from all angles.

The Bank of England forecasts inflation will rise towards 3.5 per cent by the middle of 2026, having previously estimated the UK would hit the target of 2 per cent by April.

Expectations for the general economy over the next 12 months have slumped six points to minus 37 on GfK’s index – eight points worse than this time last year. Meanwhile, the forecast for personal finances over the next year also fell, but by one point to one – the same score as last March.

However, the major purchase index – an indicator of confidence in buying big-ticket items – fell four points to minus 18, one point lower than last year.

In an indication that consumers are adopting a “wait-and-see” approach to the knock-on effects of the conflict, the savings index increased six points to 27.

“People simply do not feel the economy is robust enough to ride out the knock-on effects from the Middle East conflict,” added Mr Bellamy.

“Moreover, the decline in purchasing intentions, coupled with a six-point rise in the savings index, indicates people are holding on to their money and avoiding making major purchases while they wait to see what the medium-term impact of the conflict will be.

“There are two major concerns for the future. First, the UK will need to adopt a careful and balanced response to the wider volatility we have seen since the end of February.

“Second, with growing concerns over further sharp price rises in the coming months, unless there’s a swift resolution to the conflict, or Government schemes such as additional support with energy bills come into fruition, this ripple of fear we are seeing in the March data has the danger of turning into a flood.”

The most recent numbers show retail shopping from last month didn’t drop as much as had been forecast, in a minor boost.

But Matt Britzman, senior equity analyst at Hargreaves Lansdown, says the forward-looking consumer confidence indicator is more important.

“Fresh retail sales data showed volumes slipped 0.4 per cent month‑on‑month in February, a smaller fall than expected, meaning activity has, for now at least, held on to much of its early‑year momentum. But weakening consumer confidence is likely the more telling signal, with the GfK reading dropping to an 11‑month low in March as households grapple with the twin threat of higher inflation and softer growth prospects.”

Additional reporting by PA