UK economy: Consumers catch ‘January blues’ as confidence slumps
Consumer confidence in the health of the UK economy slumped in January, pointing to further headwinds in the coming months.
A net -34 of respondents to the British Retail Consortium’s (BRC) latest sentiment monitor said that the economy would get worse over the next three months, down from -27 in December.
This put confidence in the health of the economy at its lowest level since the BRC started collecting data on the topic in March 2024.
The survey comes after a succession of disappointing data releases, which indicate that the economy slowed significantly in the second half of last year.
Figures out last week showed that growth underwhelmed in November, expanding just 0.1 per cent having contracted marginally in both of the previous two months.
Retail sales contracted unexpectedly last month too, while December’s purchasing managers’ index (PMI) fell to its lowest level in over a year.
Most analysts think that the economy was essentially flat at the end of last year, while fears about inflation have started to rise up the agenda again too.
Economists think the headline rate of inflation could surpass three per cent by the spring on the back of higher energy prices, a weaker pound and the impact of the Budget.
All of this has raised doubts about the UK’s outlook in 2025. “It is little surprise that the public have caught the January blues,” Helen Dickinson, chief executive of the BRC said.
She warned that the Chancellor’s decision to hike employers’ national insurance and lift the minimum wage would have a knock-on impact in the retail sector in particular.
“With retailers’ tight margins leaving little scope to absorb more costs, many are warning of price rises and job cuts in the coming months,” she said.
Concerns about the economy were most severe among “older generations”, the survey suggested, with two-thirds of boomers (60-78) predicting a deterioration.
Gen Z (18-27) were the only group to expect the economy to improve over the next three months.
Despite the steep downturn concerning the wider economy, consumer expectations about their own financial situation only fell to -4 from -3 the month before.