Consumer confidence in the UK has fallen sharply to its lowest point in over a year, according to the latest GfK data, suggesting that households are pessimistic about both personal finances and the wider economic outlook.
Figures for January show the overall GfK consumer confidence index dropping five points from December to -22, its weakest reading since December 2023. Neil Bellamy, consumer insights director at NIQ GfK, said the results reflect a sense that “consumers don’t think things are changing for the better”, warning of “dark days ahead” amid gathering doubts over the economy.
All five measures contributing to the index were down this month. The gauge of expectations for the economy over the coming year tumbled by eight points to -34, while the personal finances measure dipped three points to -2. Meanwhile, the savings index climbed nine points to +30, as consumers appear to be holding on to more cash. Economists believe this could hamper growth if fewer households spend and more choose to save.
The Bank of England is expected to lower interest rates twice this year from the current 4.75 per cent, but many analysts doubt there will be deeper cuts. Household budgets remain squeezed by higher borrowing costs, which have helped to drive down the major purchases index by four points to -20.
Consumer confidence numbers are monitored closely because spending has a large impact on GDP growth. Rising confidence often leads to higher consumption; falling confidence, in contrast, can curtail household spending and dampen economic performance.
Several months of stagnation from July to November — covering the Labour government’s initial period in office — underline the UK’s broader economic difficulty. Chancellor Rachel Reeves’s budget, which included £40 billion in tax rises and a big increase in employers’ national insurance contributions, has also weighed on business optimism and hiring plans, according to official statistics and private surveys.
Speculation is mounting that Reeves may need to raise taxes further or cut public spending to shore up the government’s finances. Speaking at the World Economic Forum in Davos, she insisted the new administration’s fiscal rules are “the bedrock” of economic stability. The Office for Budget Responsibility is due to present updated forecasts on 26 March, a move that could prompt fresh policy announcements, potentially putting further strain on consumer sentiment.