Fears over Rachel Reeves’s impending “painful” Budget have set British consumer confidence back almost nine months.
In a fresh blow for the nascent Starmer Government, Britons are “nervously awaiting” some “difficult decisions to come” – the prospect of which has prompted scorn and concern from economists, politicians and analysts alike.
The nervousness is highlighted by the GfK consumer confidence index, which measures how people see both their own personal finances and economic prospects more broadly.
The index has tanked by seven points, and now sits at negative 20 – its lowest since January and the largest month-on-month fall since October 2023, new data says.
At the end of August, Sir Keir Starmer delivered his now-infamous speech from Downing Street’s rose garden
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Despite inflation slowing, real wages rising and mortgage rates taking a dive, the drop in confidence has sparked fears that the PM and Chancellor have been too “downbeat and glum”.
The index gives a good indication of where economic growth may be heading – confident households are more likely to spend their income on goods and services.
As such, a drop in morale like this could spell trouble for the second half of the year, undercutting the PM’s own economic growth goals.
At the end of August, Sir Keir Starmer delivered his now-infamous speech from Downing Street’s rose garden in which he urged Britons to “accept short-term pain for long-term good” and warned the upcoming Budget is “going to be painful”.
MORE ON THE ECONOMY UNDER LABOUR:
Britons are “nervously awaiting” some “difficult decisions to come” from Starmer and Reeves in their Budget
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Then, just yesterday, the PM told the BBC that he was “not prepared to walk past” the “badly damaged economy” his Government had inherited.
Andy Haldane, the ex-chief economist at the Bank of England, said Labour had “generated a fear and foreboding and uncertainty among consumers, among businesses, among investors in UK plc”, speaking to Sky News.
The Prime Minister hasn’t managed to evade criticism from his own ranks – one senior Labour MP, quoted in the Financial Times, said succinctly: “We need to lighten up a bit”.
While across the floor, Tory leadership frontrunner Robert Jenrick told the outlet: “The new Labour Government has created a great deal of uncertainty among investors – and that’s harming our economy”.
Rachel Reeves has been accused of sounding “glum” – but the Treasury insists it’s chasing “the prize for bringing stability to our economy”
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Neville Hill, who co-heads consultancy Hybrid Economics, said: “The downbeat fiscal assessments and glum commentary from the Prime Minister and chancellor may break the stride of the UK’s recent solid growth performance.
“If they persist in this pessimistic tone, there’s a danger it becomes a self-fulfilling prophecy.”
In response, a Treasury spokesman said: “The Chancellor has been clear that the prize for bringing stability to our economy is investment and well-paid jobs which make every part of the country better off…
“We have been honest about the state of the public finances we have inherited, but we are acting to rebuild Britain based on our fundamental strengths, including our world-leading renewable energy and service sectors.”