British consumer confidence has experienced its steepest quarterly decline since the onset of the war in Ukraine, according to a new report, as the ongoing conflict with Iran continues to fuel financial anxiety among Britons.
Sharp Decline in Sentiment
The decline in consumer sentiment, which measures how likely people are to spend or save in the future, comes amid fears of a fresh cost-of-living crisis. Uncertainty remains over the full impact the Iran war will have on food and energy costs. More than 2,000 British consumers were surveyed by accounting firm PwC after the Easter Bank Holiday in April. Optimism fell from -1 to -13, marking the biggest quarterly drop since June 2022. The sentiment index is now at its lowest level since the September 2023 recession, indicating that consumers will cut back on spending.
Generational Differences
PwC reported that confidence in household finances declined across all age groups, although young people remained more optimistic than older generations. However, young people saw the sharpest deterioration in their perception of household finances, alongside rising anxiety about job security and housing costs. Older groups appear more insulated by the triple lock pension and April's benefit increases.
Impact of Iran Conflict
The Iran war has heightened anxiety around the cost of living. Sam Waller, leader of industry for consumer markets at PwC UK, warned that sentiment would worsen as energy and food costs rise 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," he 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."
Cost of Living Concerns
The cost-of-living crisis remains the biggest concern for nine out of ten consumers, with almost three-quarters of those surveyed feeling it would directly impact their spending or saving plans for the year ahead. PwC noted that these concerns were already rising in the previous quarter, but the Middle East conflict had intensified anxiety about how everyday items might increase in price. The Energy and Climate Intelligence Unit think tank warned that food costs could be 50% higher by November than at the start of the cost-of-living crisis in 2021, as supermarkets struggle to control costs due to the Iran war.
Job Security Fears
Job security or prospects are a concern for more than 60% of under-45s and for 50% of skilled manual workers, according to the report. This follows a warning from the Item Club that Britain could lose 163,000 jobs this year, with lower-income regions bearing the brunt of the economic fallout from the Iran war. The Independent has contacted the Treasury and the Office for Budget Responsibility for comment.
