Consumer confidence collapses as Iran war provokes inflation fears
Brits’ confidence in the state of the economy has plummeted since the outbreak of war in Iran, as shoppers tighten their purse strings amid fears of sharp price rises.
Consumer sentiment over the UK’s economy has fallen to its lowest level on record, down from -30 per cent to -53 per cent, according to trade body British Retail Consortium (BRC).
Retailers and food manufacturers are bracing for the Iran war to push up their energy costs, with bosses calling for government intervention to help them avoid having to put up prices.
In March, 64 per cent of Brits said they expect the economy to get worse over the next three months, while 21 per cent were neutral and only 11 per cent thought it would improve.
This leaves the BRC’s consumer sentiment rating for the economy at -53 per cent, marking the lowest level and biggest drop this year so far.
Consumers’ assessment of their own personal finances has fallen to its most pessimistic point this year too, with 34 per cent saying they expect their cashflow to worsen while only 18 per cent think their wallets will be fuller in three months’ time.
Brits’ spending intentions reveal they are preparing to shell out more for the bare necessities as fears over inflation grow, while they plan to cut back on the non-essentials.
A net 29 per cent of people said they expect to spend more money on food and groceries in the next three months.
As many as 28 per cent of people said they will spend less on eating out, while only 16 per cent plan to spend more.
Consumer confidence slumps to record low
Helen Dickinson, chief executive of the BRC, said the prospect of higher inflation has pushed confidence in the economy and personal finances to tumble to record lows.
She said: “The drop in confidence was most pronounced among the Boomer generation, who are most reliant on investment and pension funds. Meanwhile, spending expectations rose as shoppers expected to see rising energy costs reflected across the economy.
“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.”
Wednesday’s inflation figures revealed headline and food inflation stayed flat, but the Food and Drink Federation warned this was “the calm before the storm”.
Chief executive Karen Betts said: “Food and drink is an essential, bought by every household, every week. While it can take several months for cost rises to filter fully through to shop shelves, the cost of the Iran conflict will be felt by shoppers this year.”
Betts called on the government to give food and drink manufacturers emergency support with their energy bills to avoid another food inflation jump.