- Findings suggest fallout from tax-raising budget is persisting
- Household spending is the key driver of the British economy
British households are more gloomy about the economy than when the UK was emerging from a downturn a year ago, a blow to Chancellor Rachel Reeves’ hopes of delivering the growth that has eluded Labour in its first months in power.
GfK said its gauge of consumer expectations for the economy over the next 12 months was at minus 31 this month, seven percentage points weaker than in February last year in the aftermath of a mild recession. While the indicator rose slightly from January, it remained close to a two-year low.
The findings add to evidence that Reeves’ tax-raising budget is having a lasting impact on consumers, whose spending drives the British economy. Warnings of job cuts as firms brace for a big increase in payroll costs in April are keeping households wary about spending their real wage gains.
Reeves has pledged to turbo-charge growth by investing in infrastructure projects and stripping back regulation. But with Labour sliding in opinion polls, she is under mounting pressure to deliver short-term results to boost an economy that has barely grown since the party took office in July.
In a further blow, separate data this week showed inflation at its highest level in almost a year and catching up with wage growth. Consumers are once again facing rising food and energy bills, an uncertain global outlook and the prospect of deep cuts to government spending as the public finances come under strain.
“Politicians looking for bright spots on the horizon will be disappointed,” said Neil Bellamy, consumer insights director at NIQ GfK. “The Bank of England interest-rate cut on February 6th will have brightened the mood for some people, but the majority are still struggling with a cost-of-living crisis that is far from over.”
GfK’s main gauge of consumer confidence was at minus 20 in February, up by two points from the 13-month low registered in January. Economists had expected no change. Families were more optimistic about their personal finances but remained more inclined to save their money than splash out on major purchases.
The survey echoes a separate report this week from the British Retail Consortium that showed household confidence at its lowest-ever level under Prime Minister Keir Starmer.
Written by: Irina Anghel @Bloomberg
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