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UK consumers are in a “despondent mood” as households brace for tax rises in the budget next week, amid fears that Britain could be entering a “vibecession”.
The research company GfK’s monthly survey of consumer morale shows confidence has slipped this month, to -21 points, the joint lowest this year.
It found that households are gloomier about the general economic situation of the country during the last 12 months, and also over the next year.
Neil Bellamy, the consumer insights director at GfK, reckons consumers are "holding their breath” before next Wednesday’s budget statement, explaining: “Consumer confidence fell one point this month to -21, taking the score back down to the level last seen in March this year. Also falling one point are both personal financial situation over the last 12 months and general economic situation over the next 12 months.
"The largest drop, though, was in our view of the general economic situation over the last 12 months, down five points to -42. On the plus side, the major purchase index rose two points and future personal financial expectations by one point. As the budget statement looms, consumers are in a despondent mood despite a fall in the headline rate of inflation. This month’s consumer confidence barometer paints a picture of people holding their breath to see what’s in store for them on 30 October.”
A similar poll from PwC yesterday showed the same picture. Its consumer sentiment index dropped to the lowest level in 2024, led by “notable declines” among those over 65 and the lowest socioeconomic groups.
More than 70% of people polled by PwC are planning to make short-term spending cutbacks, and more households plan to spend less on Christmas presents and celebrations than those who say they will spend more.
The drop in confidence comes despite the easing of cost of living pressures recently, with inflation dropping to 1.7% last month.
The struggling utility company Thames Water has announced plans for a £3bn financial lifeline to help it avoid collapse.
Thames told the City this morning that the proposal – to raise money from its creditors – would improve its “liquidity runway” until October 2025, with the possibility of a further extension to May 2026 if regulators agreed.
Under the plan, some of Thames’s creditors would provide an initial tranche of £1.5bn, with the possibility of another £1.5bn once Ofwat has made its “final determination”, laying out how much Thames can raise bills by.
In a boost for Thames, which is struggling under a £15bn debt pile, the plan would extend the maturities of all class A debt and class B debt by two years.
The company says that creditors representing about £6.7bn of its secured debt are backing the plan. It is seeking the support of more creditors, through a transaction support agreement announced this morning.
The agenda
• 9am BST: eurozone consumer inflation expectations
• 9am BST: IFO survey of German business confidence
• 11.30am BST: Bank of Russia sets interest rates
• 1.30pm BST: US durable goods orders for September
• 3pm BST: University of Michigan poll of US consumer confidence
We’ll be tracking all the main events throughout the day ...
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