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Consumer confidence in the UK is showing signs of weakening amid growing concerns surrounding the ongoing conflict involving the US, Israel, and Iran. According to recent findings from research company GfK, its Consumer Confidence Barometer for March reflects increasing uncertainty about the UK’s economic prospects over the next year. The survey also highlights a decline in willingness to make significant purchases, with a shift toward prioritizing savings instead.
Neil Bellamy, a representative from GfK, explained the sentiment by stating, “A ripple of fear is spreading. People simply do not feel the economy is robust enough to ride out the knock-on effects from the Middle East conflict.” This downturn in confidence coincides with data released by the Office for National Statistics (ONS), which reported a 0.4% decrease in retail sales for February, a period prior to the escalation of the Iran conflict. The ONS attributed some of this dip to a drop in supermarket sales following January, as well as reduced demand for household goods influenced by wet weather conditions during the month.
Online and catalogue retailers also experienced a reduction in sales volumes, with some analysts suggesting that consumers had advanced their purchasing during January sales events. Despite the decrease being less severe than anticipated, economist Ashley Webb from Capital Economics pointed out that this decline in consumer sentiment could indicate more challenging times ahead. Following the outbreak of conflict on 28 February, energy costs surged sharply, with Brent crude oil prices climbing roughly 50% to $110 per barrel. This increase led to noticeable price hikes at fuel stations, with petrol prices up an average of 34% and diesel by 24%, according to data from the RAC.
Concerns extend beyond fuel to rising household energy expenses. While the energy price cap is set to decrease in April, energy consultancy Cornwall Insight warns that annual energy bills could increase by about £300 from July. Reflecting these pressures, GfK’s overall consumer confidence index dropped by two points to minus 21 for March, and expectations regarding the general economic outlook over the upcoming year fell six points to minus 37. Webb commented that this “decline in consumer confidence… is probably the start of a bigger fall and suggests real household spending growth will soften in 2026.”
The report further indicated a reduced likelihood of consumers making substantial purchases such as furniture and electronics, opting instead to save more money amid economic uncertainties. The February drop in retail sales recorded by the ONS was slightly less than the 0.7% decline some analysts had forecast. However, Susannah Streeter, chief investment strategist at Wealth Club, described the situation as “still a shaky base” given the conflict’s impact. She warned that “with confidence weakening, costs rising due to higher freight and energy costs and spending intentions faltering, the outlook for retailers looks set to be an increasing struggle in the months to come.”
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