UK economy: ‘Consumers see dark days ahead’
Consumer confidence has fallen to its lowest level in over a year, a new survey shows, fuelled by worsening expectations for the UK economy in 2025.
GfK’s overall consumer confidence index fell to -22, which was down five points on December and put confidence at its lowest level since the end of 2023.
The fall was driven largely by consumers’ worsening outlook on the UK economy for the next year, which fell by eight points to -34.
Household views about their personal financial situation also deteriorated, falling three points to -2.
“New Year is traditionally a time for change, but looking at these figures, consumers don’t think things are changing for the better,” said Neil Bellamy, consumer insights director at GfK.
“These figures underline that consumers are losing confidence in the UK’s economic prospects.”
The survey’s savings index, which reflects the likelihood that consumers will save rather than spend disposable income, climbed by nine points to hit 30.
Although it is not included in the overall confidence index, Bellamy said it was “unwelcome” because it suggests that “people see dark days ahead”.
The UK has seen a relatively elevated savings rate since the pandemic and many economists expect consumers to dip into their savings as the year progresses, which would help fuel higher consumer spending.
But the survey suggests there’s a danger consumers will continue squirrelling funds away, which would weigh on growth.
GfK’s release comes just a day after a similar report from the British Retail Consortium (BRC) showed that nearly half of consumers expect the economy to deteriorate over the next quarter.
The surveys will be a worrying sign for the government as it seeks to reinvigorate an economy that has stuttered since last summer’s general election.
Growth underwhelmed in November, expanding just 0.1 per cent having contracted marginally in both of the previous two months.
Retail sales contracted unexpectedly last month too, while the latest purchasing managers’ index (PMI) fell to its lowest level in over a year.
Many commentators have argued that the Budget, which included tax hikes worth £40bn, has depressed economic activity.
While consensus among economists is for growth to accelerate to 1.2 per cent across this year, this was a slight downgrade on the 1.3 per cent pencilled in by analysts in December.