‘Reason for cautious optimism’: UK consumer confidence rebound on cards
Consumer confidence is set for a pick-up this year as the economy starts to improve and the UK adjusts to higher costs, according to a new survey.
While the end of last year was gloomy for both businesses and consumers, analysts at Deloitte have said there is “reason for cautious optimism” going into the summer.
Overall confidence was unchanged quarter on quarter but Brits were generally more optimistic about their own finances than those of the Treasury, with a 14 percentage point drop in consumers’ attitude about the state of the economy pulling down upticks elsewhere.
“While this is the first time since 2022 that confidence has stalled, we expect consumer confidence to continue to recover this year alongside improving economic conditions,” Céline Fenech, consumer insight lead at Deloitte, said.
Fenech noted “the prices of essential items and job security” as key metrics which will need to improve for consumer confidence to rise this year.
Neil Carberry, REC chief executive, suggested that job security is likely to improve in the middle of the year “with an anticipated turn in the economic cycle.”
“There are reasons for cautious optimism as we move into the middle of 2025,” he added.
Oliver Vernon-Harcourt, head of retail at Deloitte, similarly said that worries about inflation should be offset by “the rise in the minimum living wage, more public spending [and] easing monetary and fiscal policies.”
Priority for retailers is combatting costs
The sentiment of senior business weakened in the fourth quarter, as CFOs expect to introduce cost cutting measures in the next 12 months, according to Deloitte.
Tax hikes announced in the Autumn budget have increased costs across all industries, with some such as retail, hospitality and construction particularly hard hit.
Businesses have suggested various ways to combat the increase in prices, but most strategies include a cocktail of cost efficiencies, reduced investment and small prices rises.
“Retailers must remain focused on navigating these upcoming challenges to ensure long-term profitability and stability in a very challenging environment,”
But January spending could provide a boost, with sales this month expected to be the most popular of the year, according to BCG.
More than six in ten people will be taking part across the UK, significantly more than the Boxing Day sales and up slightly on Black Friday, BCG said.
Carberry suggested that the effects of the budget may be less than initially feared, with companies already “beginning to adjust to the realities of a challenging Budget after the shock of the autumn”.
“The foundations of the UK economy remain resilient,” he said.
Deloitte expect GDP to rise by one per cent in 2025, a “rather better outcome than last year”.