UK Consumer Confidence Plummets Amid Soaring Cost of Living

UK Consumer Confidence Plummets Amid Soaring Cost of Living
Customer at the fruit and vegetable section at a Sainsbury's supermarket in Walthamstow, east London, on Feb. 13, 2022. (Tolga Akmen/AFP via Getty Images)
Alexander Zhang

Confidence among UK consumers has declined sharply as British households come under increasing pressure amid the cost-of-living crisis, a new survey has revealed.

The Consumer Confidence Index from YouGov and the Centre for Economics and Business Research (CEBR) fell by 4.2 points in August from 103.0 to 98.8, the largest decline since the early stages of the COVID-19 pandemic.

Both household finance measures—for the last 30 days and the outlook for the next 12 months—dropped by 3.1 points and 10 points respectively.

Every other measure also saw worsening scores, including the outlook for house prices plummeting by 7.2 points to 124.9.

Perceptions of job security looking ahead fell from 120.9 to 118.5.

Emma McInnes, global head of financial services at YouGov, said: “This latest dip in consumer confidence exemplifies a longer trend of sustained decline. In spite of July’s small uptick, this data from August sees our index score entering negative territory for the first time since the early days of the pandemic in June 2020.”

Weakening Sentiment

The survey was taken between Aug. 1–31, before Prime Minister Liz Truss announced her plan to freeze energy bills at £2,500 ($2,933) a year for the next two years for a typical household.

Kay Neufeld, head of forecasting at CEBR, said: “While the announcement of the energy price freeze by the new Prime Minister Liz Truss is expected to alleviate some of the most pressing concerns, weaker sentiment has spilled over into the other constituent metrics of the index.

“Most notably, consumers are more downbeat about the future value of their own home as rising mortgage rates are expected to trigger a price correction in the property market.”

The UK’s inflation rate fell from 10.1 to 9.9 percent in August thanks to a drop in fuel prices, but still remains close to its 40-year record.
Due to high inflation, British workers’ incomes have been shrinking in real terms despite significant wage rises.

According to the latest data from the Office for National Statistics (ONS), though the average total pay (including bonuses) grew by an annual rate of 5.5 percent in the period of May to July 2022, the real-term pay fell by 3.6 percent year-on-year when inflation is taken into account.

This is the largest fall in total pay since February to April 2009, when it fell by 4.5 percent.

Meanwhile, food prices have continued to rise.

According to research firm Kantar’s latest report, published on Sept. 13, grocery price inflation hit 12.4 percent during the past month, up from last month’s previous record of 11.6 percent.

PA Media contributed to this report.