Confidence in the future of the UK economy has plummeted to its lowest level since the end of 2022, according to a recent survey, as millions of households grapple with the financial fallout from the Iran war.
Deep-Seated Pessimism Takes Hold
The latest Which? consumer insight tracker indicates that price pressures, driven by the escalating conflict in the Middle East, are forcing an estimated 14 million households to make adjustments to cover daily essentials. These adjustments include dipping into savings, selling possessions, or borrowing money.
Economic Confidence in Freefall
Confidence in the UK economy fell by 13 points to a score of -56 in the month leading up to 13 March, marking the lowest recorded level since late 2022. This decline reflects a widespread pessimism, with two-thirds of UK adults expecting the national economy to worsen over the next year, while only 12% anticipate improvement.
Although confidence has not yet reached the depths seen during the pandemic or the 2022 cost of living crisis, the drop highlights growing strain as households continue to struggle financially.
Savings Become a Lifeline
Savings are increasingly shifting from a safety net to a critical lifeline, with 26% of households now regularly using savings to bridge the gap between income and essential costs. This trend contrasts with the end of last year when financial stress appeared to be easing.
Confidence in future household finances has also hit its lowest point since April last year, falling five points to -15 this month.
Inflation Expectations Rise
Headline UK inflation is now projected to remain elevated for longer due to the Iran war. Previously expected to fall to the Bank of England's 2% target, inflation is now forecast to rise to 3.5% and stay above target throughout 2026, exacerbating pressure on households.
Expert Commentary and Advice
Sue Davies, head of consumer protection policy at Which?, commented: "Our research shows a concerning shift in consumer sentiment, with confidence in the economy hitting its lowest point in years as households face a daunting combination of rising prices and global instability."
She urged those struggling with bills to contact their providers promptly and seek free, independent debt advice, while calling on businesses to support their customers during this challenging period.
