Consumer and business confidence in the UK is at an all-time low this year while households and businesses are on the lookout ahead of possible tax increases in the Budget due on 30 October.
It stood at minus 21 in October, according to the GfK consumer confidence index, which reflects personal feelings about finances and current and existing economic conditions. That’s one point less than September. It is equal to the lowest recorded in February and March of this year. Therefore, this fall means that consumers are generally less willing to spend—at least for now—as fear about the financial future overcomes optimism.
Neil Bellamy, director of consumer information at GfK, described the situation as “melancholy”, as consumers are waiting for some clarity on what to do in the area of monetary policy. Notably, this is driven by the government’s stated public policy objective of tackling an expected funding gap of around £40 billion through tax increases.
In a similar development, business also fell as a separate survey found business confidence fell due to the weak result, and the S&P Global composite output index for the UK PMI was the lowest since last April at 51.7. That would have caused the first job losses this year, as major companies finally begin to respond to what Chris Williamson, chief economist at S&P Global Market Intelligence, called “depressing government rhetoric” and uncertainty about the Budget.
Chancellor Rachel Reeves has promised the public that income tax, national insurance and VAT rates will not rise, but she is likely to extend the personal tax threshold beyond 2028 – a move that could be seen as a potentially costly tax hike. an extra £7bn a year. And Reeves hasn’t ruled out employers’ national insurance contributions will rise.
There, he expressed an investment view, not austerity, in a recent Financial Times article. He also reaffirmed his “commitment to continued investment in the United Kingdom,” hoping to turn the economy around 14 consecutive years of negative growth. More importantly, he said he would reform the financial rules so that the UK could build up an investment of around £20 billion a year through more borrowing, in a bid to avoid a cut in public sector investment.
As the housing market continues to see positive trends, the rate of inflation and mortgage rates have been declining recently; however, consumer and business confidence is on the decline. In fact, it seems that uncertainty about the government’s possible tax policies is dominating these positive macroeconomic figures. Figures released last month show that the weakness in housing consumption continues as consumers are more concerned about saving money.
The GfK index showed that the family’s judgment of the economy fell by 5 points, to 42, the lowest since March. Inflation eased to 1.7% in September, the lowest rate for more than three years, but concerns over public services appear to be overshadowing fears over tax rates with less than half of respondents now satisfied with the NHS, a record low.
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