UK consumer confidence plunges as cost of living jumps

UK consumer confidence has dropped to its lowest for more than a year as households face a barrage of rising costs that will squeeze budgets, a survey showed.

The GfK consumer confidence index fell 7 points in February to -26 - the lowest reading since January 2021 which was one of the worst points of the Covid-19 crisis with the UK in lockdown.

All measures that make up the index fell in February with the biggest declines shown in consumers' expectations for the coming year. With budgets already under pressure, households face soaring energy costs, higher shop prices, tax increases and rising interest rates.

Consumers' view of their personal finances and the wider economy over the past year became gloomier, the survey showed. But the biggest drops were in households' outlook for the next 12 months.

The outlook score for personal finances dropped to -14 from -2 in January and the reading for the economic outlook plunged to -43 from -32. As a result, households are also less likely to make big purchases than in January.

Joe Staton, GfK's client strategy director, said: "Fear about the impact of price rises from food to fuel and utilities, increased taxation and interest rate hikes has created a perfect storm of worries that has shaken consumer confidence.

"There’s clear anxiety in these findings as many consumers worry about balancing the household books at the end of the month without going further into debt. Slowing consumer spend slows the wheels of the UK economy so this is unwelcome news."

The crumbling of sentiment in one of the closest-watched consumer surveys happened before the escalation of the Ukraine crisis, resulting in Russia mounting an invasion on Thursday. The war will shake consumer confidence in general as well as sending oil and gas prices higher - with a further impact on household energy bills.

GfK surveyed 2,000 individuals between 1 February and 14 February.