British consumer confidence has seen the sharpest quarterly decline since the onset of the war in Ukraine, a new report suggests, as the Iran conflict continues to cause financial concern for Britons.
The decline in consumer sentiment, which indicates how likely people are to spend or save in the future, is coupled with concerns around a fresh cost of living crisis as uncertainty remains around the full impact the Iran war will have on food and energy costs.
More than 2,000 British consumers were surveyed about their confidence as part of accounting firm PwC’s quarterly survey after the Easter Bank Holiday in April. Optimism dropped from -1 to -13, the biggest quarterly fall since June 2022.
The sentiment index is now at its lowest level since the September 2023 recession, indicating that people will cut back on spending.
The firm said confidence in household finances was down across all age groups, although young people remained more optimistic than the older generation. This is despite young people seeing the sharpest deterioration in their perception of household finances, alongside rising anxiety around job security and housing costs, while older groups seemingly remain more insulated by the triple lock pension and April’s benefit rises.
Sam Waller, leader of industry for consumer markets at PwC UK, said the drop in sentiment would get worse as energy and food costs would increase later this year.
“Rising costs are prompting shoppers to pull back spend across the board, and it’s expected sentiment will get worse before it gets better, as consumers face higher energy and food costs later in the year,” the expert said.
“For businesses, this environment demands agility and resilience. With customers increasingly cost-conscious, responding to their changing needs, optimising supply chains, strengthening logistics, and building flexibility into operations to manage demand volatility and rising input costs will be key to navigating the uncertain months ahead.”
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The cost of living crisis remains the biggest concern for nine out of 10 consumers, with almost three-quarters of those surveyed feeling this would have a direct impact on their spending or saving plans for the year ahead. The firm said that these concerns were already rising in the previous quarter, but the Middle East conflict had heightened anxiety around how the cost of everyday items might increase.
The cost of food is expected to be 50 per cent higher by November than at the start of the cost of living crisis in 2021, the Energy and Climate Intelligence Unit think tank has warned, as supermarkets struggle to control costs due to the Iran war.
Meanwhile, job security or prospects are a concern for more than 60 per cent of under-45s and for 50 per cent of skilled manual workers, according to the report. This comes as the Item Club warned on Monday that Britain was set to lose 163,000 jobs this year, with lower-income regions set to bear the brunt of the economic fallout from the Iran war.
The Independent has contacted the Treasury and the Office for Budget Responsibility for comment.
