The GfK Consumer Confidence index in the UK slipped to -21 in October 2024, down from -20 in September. This marks the lowest point for the index this year and matches levels seen in February and March. The decline comes as households and businesses brace for possible tax hikes in the government’s upcoming Budget, which has sparked growing concern across the country.

Why the Drop? Budget Concerns and Tax Hike Warnings

One key factor weighing on confidence is the government’s potential tax increase announcement, expected in next week’s Budget statement. Prime Minister Keir Starmer and Chancellor Rachel Reeves have already signaled that tax rises may be necessary to address the government’s funding gap. This possibility has left consumers cautious about their financial outlook, adding pressure on household budgets.

Neil Bellamy, GfK’s consumer insights director, shared that consumers are “in a despondent mood” as the Budget looms, despite recent signs of easing inflation.

Slowdown in Inflation and Wage Growth Fuels Rate Cut Bets

The economic landscape is also impacted by a significant slowdown in both inflation and wage growth. These changes have led traders to anticipate rate cuts from the Bank of England in November and December. The combination of potential tax increases and an economic slowdown has created a mixed outlook for UK consumers and businesses as the year nears its end.

What’s Next for UK Consumers?

As the Budget announcement approaches, UK households are navigating uncertain economic waters. With three of five confidence indicators declining, the path ahead may be challenging, with hopes pinned on both Budget measures and the Bank of England’s next moves.