UK Consumer Confidence Plummets as Iran War Sparks Inflation Alarm
Consumer confidence in the United Kingdom has experienced a dramatic collapse following the onset of the Iran war, according to new research released by the British Retail Consortium. The sharp escalation in energy prices, triggered by the effective closure of the Strait of Hormuz and attacks on regional infrastructure, has ignited widespread fears of heightened inflation and weakened economic growth across oil-importing nations.
Survey Reveals Deepening Economic Pessimism
A survey conducted by Opinium on behalf of the BRC between 10 and 13 March paints a bleak picture of public sentiment. When questioned about the state of the UK economy over the next three months, a staggering 64% of respondents anticipated further deterioration, with only 11% expecting improvement. This resulted in a balance of -53%, a sharp decline from the -20% recorded just a month earlier.
UK adults also expressed significantly greater pessimism regarding their personal financial outlook, with the negative balance dropping to -17 from -6 in February. Helen Dickinson, chief executive of the BRC, commented, "Consumer confidence collapsed as the Middle East conflict raised the prospect of higher inflation in the months ahead. Just as the economy was beginning to turn a corner on inflation, the rise in global energy prices is particularly unwelcome for businesses and families."
Inflation Holds Steady Amid Pre-War Calm
This sharp decline in consumer confidence follows official figures showing the inflation rate held steady at 3% in February, prior to the war disrupting expectations. As recently as last month, the Bank of England had projected inflation would return to the government's 2% target in spring, potentially paving the way for further interest rate cuts. However, last week's monetary policy committee meeting left interest rates unchanged and hinted that the next adjustment could be an increase.
Grant Fitzner, chief economist at the Office for National Statistics, noted, "The largest upwards driver was the price of clothing, which rose this month but fell a year ago. This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices." Since the war began, petrol prices have surged significantly, with the RAC reporting a 12p or 9% increase per litre of unleaded fuel by the end of last week.
Food Prices and Global Trade Under Pressure
Slower food price inflation influenced February's data, driven by declines in items such as olive oil, flour, and pizza. However, the Food and Drink Federation warned this might represent "the calm before the storm." Karen Betts, FDF chief executive, stated, "The longer the conflict in the Middle East goes on, the bigger its impact will be on food prices. With food and drink price inflation already running above historical averages, heightened energy, maritime fuel and fertiliser costs will put further pressure on prices."
In response to the crisis, Chancellor Rachel Reeves announced on Tuesday that the Treasury is preparing contingency plans to potentially protect consumers from rising energy prices later in the year. She emphasised that any intervention would involve targeted support for needier households rather than broad handouts for all energy customers.
Business Leaders Urge Continued Engagement
Despite the darkening global outlook, Shevaun Haviland, director general of the British Chambers of Commerce, will urge member companies on Thursday to persist in seeking export opportunities. "The global economy is reeling from the Middle East conflict. Trade routes are severely disrupted; energy costs and wider prices are soaring. The impact of this war is profound. But in a more uncertain world the answer is not to retreat. It is to reach out, build more connections, open more doors and trade more, not less," she is set to declare.
Analysts have been hastily revising down their UK growth forecasts for 2026, concerned that higher energy prices—already evident at petrol pumps—will lead nervous shoppers to reduce spending in other areas, further straining the economy.
