UK consumer confidence falls 11 points in October, worst drop since Brexit vote
UK consumer confidence dropped 11 percentage points to -24 in October, the fastest fall outside the Covid pandemic since the 2016 Brexit vote, according to GfK, days before John Healey's first budget on Wednesday.
UK consumer confidence falls 11 points in October, worst drop since Brexit vote
The UK's consumer confidence gauge has suffered its sharpest fall since the aftermath of the Brexit referendum, according to GfK, whose consumer confidence index dropped 11 percentage points in October to -24. Only the pandemic produced a bigger single-month decline. The reading lands less than a week before John Healey's first budget as chancellor, which takes place on Wednesday.
A historic drop in the index
GfK said the last time the index fell by this much in a single month was July 2016, after the Leave result in the EU referendum. The scale of the October decline puts it among the steepest on record for a survey the government and the Bank of England have tracked since the early 1970s as an early warning indicator.
- The index fell 11 percentage points to -24 in October
- The previous fall of this size came in July 2016, after the Leave result
- The largest ever fall was 25 points in March 2020, just after the first UK lockdown began
- The survey has served as an early warning indicator since the early 1970s
Cost-of-living pressures erode summer optimism
The mood had been brighter only months earlier. In the summer, GfK credited a "Burnham bounce", a strong World Cup run by the men's England football team and sunny weather with lifting consumer spirits. Neil Bellamy, GfK's consumer insights director, said relentless cost-of-living pressures, against an international backdrop of unresolved regional conflicts feeding 3.5% inflation, had swept aside that optimism following the new prime minister's appointment.
Relentless cost-of-living pressures, against an international backdrop of unresolved regional conflicts.
Consumers turned less confident both about the strength of their own personal finances and about the outlook for the British economy overall. GfK's major purchase index fell 14 points to -22 in October, suggesting households may rein in spending over the winter.
Household costs and inflation
Price pressures are stacking up on household budgets, and official figures released on Wednesday showed headline inflation rose by more than expected to 3.5% last month.
- Petrol and diesel prices have surged close to record highs, and energy bills have risen ahead of a difficult winter
- Consumer energy bills could reach £2,000 a year from January for a typical household
- TUC analysis puts the average additional cost to UK households from mortgages, loans, energy and water bills over the past five years at almost £14,000
- Headline inflation rose more than expected to 3.5% last month
What the budget may bring
Healey has pledged to use his budget statement to announce "breathing space" measures, while warning that the government has limited resources as borrowing costs sit at decades-high levels. The fiscal picture he faces includes a government deficit that came in at a worse-than-forecast £24.5bn.
Business groups are pressing for relief of their own. CBI figures show investment intentions among manufacturing businesses were subdued in the three months to October as cost pressures stayed high, though the organisation's Industrial Trends Survey expects manufacturing output to stabilise over the next three months.
Cameron Martin, senior economist at the CBI, said the government must give manufacturers the breathing space to invest and drive the productivity growth needed to sustain rising real wages. He called on next week's budget to cut business electricity costs, reduce labour costs and reform business rates.
Attention now turns to Healey's budget statement on Wednesday. The Treasury has been approached for comment.
