According to the latest data from GfK, consumer confidence in Britain has fallen sharply to its lowest point in more than a year, suggesting households are pessimistic about both personal finances and the wider economic outlook.
Figures for January show that the overall December GfK consumer sentiment index fell five points to -22, its weakest reading since December 2023. Neil Bellamy, director of consumer insights at NIQ GfK, said the results reflect the feeling that “ consumers don’t think things are changing for the better,” warning of “dark days ahead” amid growing doubts about the economy.
All five measures that contributed to the index fell this month. The gauge of expectations for the economy for the coming year fell eight points to -34, while the measure of personal finance fell three points to -2. Meanwhile, the savings index rose nine points to +30 as consumers appear to be holding more cash. Economists believe this could hinder growth if fewer households spend money and more households choose to save.
The Bank of England is expected to cut rates twice this year from the current 4.75 percent, but many analysts doubt there will be any deeper cuts. Household budgets remain under pressure from higher borrowing costs, which have contributed to the major purchases index falling four points to -20.
Consumer confidence figures are closely watched because spending has a major impact on GDP growth. Rising confidence often leads to higher consumption; Declining confidence, on the other hand, can limit household spending and dampen economic performance.
Several months of stagnation from July to November – during the Labor government’s first term in office – underline Britain’s wider economic problems. Chancellor Rachel Reeves’ budget, which included £40 billion in tax increases and a big increase in employers’ national insurance contributions, has also weighed on business optimism and workforce plans, according to official statistics and private surveys.
Speculation is mounting that Reeves may need to further raise taxes or cut government spending to shore up public finances. During her speech at the World Economic Forum in Davos, she emphasized that the new government’s fiscal rules are “the basis” for economic stability. The Office for Budget Responsibility will present updated forecasts on March 26, a move that could lead to new policy announcements, potentially putting further pressure on consumer confidence.