Consumer confidence in the UK has fallen at the fastest rate outside the Covid pandemic since the 2016 Brexit vote. The latest data from GfK indicates that confidence plunged by 11 percentage points in October to -24, driven by escalating economic pressures from the ongoing war in the Middle East and the rising cost of living.

Context

With less than a week before Chancellor John Healey’s first budget, the drop in consumer confidence highlights significant challenges ahead. GfK noted that the last time the index fell this much in a single month was in July 2016, following the shock result of the EU referendum. The index, which has been monitored by the government and the Bank of England since the early 1970s, recorded its largest ever fall of 25 points in March 2020, just after the start of the first UK lockdown.

Recent Developments

This latest snapshot marks a stark contrast to the summer months, when GfK reported a “Burnham bounce” fueled by a strong performance from the England football team during the World Cup and favorable weather conditions. However, Neil Bellamy, consumer insights director at GfK, stated:

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"Relentless cost-of-living pressures, against an international backdrop of unresolved regional conflicts that are themselves contributing to domestic inflation now at 3.5%, appear to have swept aside the nascent optimism we saw following the appointment of a new UK prime minister this summer."

Consumers are now facing a fresh squeeze on living standards due to the ongoing conflict in the Middle East. Petrol and diesel prices have surged close to record highs, and energy bills are expected to rise significantly as winter approaches, further straining households already burdened by years of price increases.