UK faces biggest fall in consumer confidence since start of Ukraine war, research suggests
British consumer confidence has seen its sharpest three-month fall since the start of the war in Ukraine, a new report suggests, as the Iran conflict continues to cause financial anxiety for Britons.
The decline in consumer confidence, which indicates how likely people are to spend or save in the future, is compounded by concerns about a new cost-of-living crisis as uncertainty remains about the full impact the Iran war will have on food and energy costs.
More than 2,000 British consumers were surveyed about their confidence as part of accounting firm PwC’s quarterly survey following the Easter Bank Holiday in April. Optimism fell from -1 to -13, the biggest quarterly decline since June 2022.
The sentiment index is currently at its lowest level since the recession in September 2023, suggesting people will cut spending.
Confidence in household finances has declined across all age groups, but young people remain more optimistic than the older generation, the firm said. This is despite young people seeing the sharpest deterioration in their perceptions of household finances, rising concerns about job security and housing costs, while older groups remain more isolated due to triple pension and benefit increases in April.
PwC UK’s consumer markets industry leader Sam Waller said the decline in sentiment would worsen as energy and food costs rise later this year.
“Rising costs are causing shoppers to pull back on spending across the board, and confidence is expected to worsen before getting better as consumers face higher energy and food costs later in the year,” the expert said.
“For businesses, this environment requires agility and resilience. With customers becoming increasingly cost-conscious, responding to their changing needs, optimizing supply chains, strengthening logistics and building flexibility in operations to manage demand variability and rising input costs will be key to moving forward in the uncertain months ahead.”
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The cost of living crisis remains the biggest concern for nine in 10 consumers; Almost three-quarters of respondents think this will have a direct impact on their spending or savings plans for the coming year. These concerns had already increased in the previous quarter, but the conflict in the Middle East had raised concerns about how the cost of everyday items could rise, the firm said.
The Energy and Climate Intelligence Unit think tank has warned that food prices will be 50 per cent higher by November than they were in 2021, when the cost of living crisis began, at a time when supermarkets are struggling to control costs due to the Iran war.
Meanwhile, job security or prospects are a concern for more than 60 percent of those under 45 and 50 percent of skilled manual workers, according to the report. It comes as Item Club warned on Monday that Britain will lose 163,000 jobs this year and that lower-income areas will bear the brunt of the economic fallout from the Iran war.
Independent The Office for Treasury and Budget Responsibility has been contacted for comment.
