UK Consumer Confidence Falters as Tax Rise Fears Grow

British consumer confidence faltered this July amid mounting expectations that Rachel Reeves may introduce further tax increases in the coming autumn budget. The widely monitored GfK consumer confidence index declined by one point, reversing the slight progress recorded over the previous two months. Now standing at minus nineteen, the gauge remains well below its long-term average, currently sitting at minus ten.

Heightened concerns over the wider economic outlook appear to be prompting people to adjust their financial habits. The associated GfK savings index rose seven points to thirty-four, its highest level since November 2007. This rise suggests that households, wary of the economic climate, are building up their contingency funds. GfK’s consumer insights director Neil Bellamy noted that although the savings index does not feed directly into the overall confidence score, its upward trajectory signals growing unease about the future.

The survey, which collected responses in the first half of July, found no movement in expectations for personal finances over the coming year, with that sub-index remaining at two. These figures pre-date the recent release from the Office for National Statistics confirming an unexpected jump in inflation to three point six per cent for June, now at its highest since January of the previous year.

Sentiment regarding the country’s general economic situation over the past 12 months has deteriorated notably since last July. That indicator has now slipped to minus forty-four, compared with minus thirty-two a year ago, highlighting public concerns since the new Labour government took office. Although the government previously pledged not to increase taxes on working people, Bellamy suggested that many are cautious over whether this promise can be fulfilled in light of mounting pressures.

Key measures covering personal finances, the overall economy, and consumer purchase intentions all stayed flat in July, reflecting a cautious ‘wait and see’ attitude. Ongoing speculation surrounding possible tax increases in the autumn budget, paired with escalating inflation, is raising the prospect of further economic headwinds. Bellamy warned that any emerging challenges or shocks could quickly drive confidence even lower from its current position.

There were, however, signs that consumers are marginally less hesitant about making significant purchases, such as furniture or electrical goods. The big purchase index inched up by one point to minus fifteen, suggesting a modest willingness among some households to spend despite the uncertain climate.

Recent official figures showed that the UK economy contracted by zero point one per cent in May, marking the second consecutive monthly dip. While Chancellor Reeves acknowledged this as “disappointing”, she reiterated her commitment to stimulate growth and increase incomes for households across the country. Nevertheless, with the GfK confidence index drifting steadily downward, prospects remain subdued as families brace for further fiscal and economic developments in the months ahead.