New Years optimism wears off as economic expectations drop
New Year’s optimism is beginning to fall away with the number of people expecting the economy to improve this year falling at the start of February.
According to the latest Morning Wire/Freshwater Strategy poll of UK voters, the number of people expecting the economy to improve in the next 12 months has fallen by four percentage points to 19 per cent since January.
Meanwhile, over 50 per cent of voters anticipate the economy to worsen over the next year.
It comes as Brits continue to grapple with the ongoing cost of living crisis, which added to respondents’ overwhelming assessment that the country is “heading in the wrong direction”.
Two in five Brits expect their household finances to deteriorate with 16 per cent predicting they will be in a much worse financial position by 2027.
Just six per cent expect their finances to get a lot better over the course of the year, while 35 per cent expect their position to remain the same.
More Brits are looking to offset tax changes enacted in the Autumn Budget and deal with challenging economic conditions.
The latest Autumn Budget introduced a number of policy changes, including the decision to extend the income tax threshold freeze until 2031, with fiscal drag forcing more households to tighten their spending and protect their income.
Personal finance woes
Brits also predict their personal finances will become increasingly strained, with 42 per cent expecting to be worse off, a two percentage point increase from January.
In contrast, only 20 per cent see their personal finance situation improving, dropping from the 26 per cent reported last month.
This has led some people to express concern that they may be unable to pay their bills or in order to do so they may have to incur entering debt.
Others were planning to limit or cut discretionary spending to ensure they could afford essential costs, including bills and food shopping, while others are budgeting discretionary spending each month to make sure they have enough left for other expenses.
Falling living standards
Nearly half of voters are also bracing themselves for a decline in living standards in the UK during 2026.
Just under a fifth expect living standards to worsen a lot, while 30 per cent expect them to decline slightly.
This comes as Brits voice a lack of confidence in the UK government’s plans to achieve economic growth, with Labour contending with high economic inactivity and sticky inflation coupled with low investment, which has ultimately driven down productivity.
Within the G7, the UK has consistently struggled to match front runners Canada and the US in investment rates and productivity, but according to the International Monetary Fund, the UK is projected to be the third fastest growing economy in the cohort.
Forecasts show GDP growth of between 1.3 and 1.5 per cent, outpacing Japan, Italy and France.