Britain’s households have grown increasingly pessimistic about their financial future, with consumer confidence falling to its lowest level in more than three years as inflation and fears of higher interest rates threaten to choke spending ahead of the Budget.
The S&P Global index of household confidence dropped for a third consecutive month to 41.3 in October, its weakest reading since July 2023. The survey, which has tracked 1,500 UK households monthly since 2009, points to mounting pressure on consumers already struggling with the cost of living.
More than half of households — 57 per cent — expect interest rates to rise, according to the research, signalling growing concern that borrowing costs could increase just as families are trying to protect squeezed budgets.
The deterioration was particularly pronounced in expectations for household finances over the next 12 months. October was only the second month in more than three years, alongside April, in which households across every income bracket expected their financial wellbeing to worsen.
The strain is also being felt in current finances. Both public and private sector workers reported deteriorating conditions, with the decline more severe among public sector employees. Meanwhile, the measure of willingness to make major purchases remained close to its lowest level in more than three years, suggesting households are increasingly reluctant to commit to expensive goods.
Pessimism about the jobs market has now persisted for five consecutive months, adding another warning sign for an economy reliant on consumer spending to sustain growth.
Maryam Baluch, an economist at S&P Global Market Intelligence, said the slump underscored the difficult conditions facing the government before its forthcoming Budget. She said hopes of a so-called “Burnham bounce” had proved short-lived, overshadowed by the cost-of-living impact of events in the Middle East and the prospect of higher borrowing costs.
The findings present a delicate challenge for policymakers. The Chancellor must seek to support economic growth while avoiding measures that could unsettle bond investors or add to inflationary pressures.
For households, however, the immediate concern is more basic: whether wages will stretch far enough, whether borrowing will become more expensive and whether financial conditions will deteriorate further.
With confidence weakening across income groups, October’s survey suggests the pressure on Britain’s consumers is broadening — leaving the government facing a Budget in which the room for manoeuvre may be narrowing just as public expectations rise.
Leave a Comment