Consumer confidence in the UK dropped sharply in September, raising concerns about the impact of talk of Budget cuts and tax hikes. The GfK Consumer Confidence Index fell by seven points to -20, with major declines in the areas of perception of the general economy, propensity for big purchases, and expectations for future personal finances. The decline came after recovery in readings from years of financial uncertainty.
While it is impossible to definitively link official warnings of a “painful” Budget at the end of August with the drop in consumer confidence, some economists have noted the correlation. Other measures of confidence have also dipped, despite an interest rate cut in August. The decline has sparked concern among some business leaders, including Iceland boss Richard Walker.
However, Chancellor of the Exchequer Rachel Reeves has denied a sense of “doom and gloom” and has said that a “high degree” of business confidence exists in the UK economy bringing “stability back”. The government is expected to outline more positive economic news at the upcoming Labour party conference and investment summit.
Nonetheless, government communication regarding tax hikes, cuts to welfare, and departmental cuts suggest efforts will continue to address a budget’s deficit. Winter fuel payment cuts and warnings about further policy changes may fuel consumer worries in advance of the budget release on 30 October
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