- BRC says half of consumers expect worsening in economy
- Household morale has been weakened by Labour’s tax hikes
Confidence among UK households slipped to a new low under the Labour government, as consumers brace for higher prices and businesses warn of a hiring hit from rising payroll taxes.
Half of Britons expect the British economy to worsen over the next three months, while just one-in-eight expect a pickup, according to the British Retail Consortium’s sentiment monitor.
The net score of minus 37 is the worst since Keir Starmer’s party won a landslide victory last July and marks a sharp reversal from the plus 2 reading seen in his first month as prime minister.
The UK government is struggling to turn around consumer and business confidence after it was rattled by more than £40 billion ($50.4 billion) of tax hikes, prompting warnings of job cuts. The biggest burden will fall on companies in the shape of an increased payroll levy known as national insurance contributions.
Families face a darkening outlook with inflation climbing again and the economy barely growing in the second half of 2024. A volatile geopolitical backdrop adds to the headwinds, as the threat of US tariffs looms over many countries.
“With many businesses warning of the impact that April’s employer national insurance contributions increase will have on hiring, and the rising energy price cap pushing up the cost of domestic bills, it is little surprise that many households are worried,” said Helen Dickinson, chief executive of the BRC. “People’s expectations of the economy reached a new low, having fallen almost 40 points since July 2024.”
While the BRC’s spending gauge improved, it said this had been largely driven by expectations for higher prices in the future. It said that two-thirds of retailers expect to hike prices after facing an estimated £7 billion of extra costs, including from the rise in national insurance.
Written by: Tom Rees @Bloomberg
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