UK Consumer Confidence Takes a Hit Amid Economic Uncertainty
In a significant development for British Prime Minister Keir Starmer's Labour government, the UK consumer confidence index fell for the first time in nearly three years, signaling fresh challenges ahead. A recent Deloitte survey, released on Monday, highlights growing unease among consumers, particularly regarding job security and income prospects.
Key Data Points from the Deloitte Survey
- The consumer confidence index dropped by 2.6 percentage points to 10.4% in Q2 2025—the lowest level since Q1 2024.
- This marks the first meaningful decline since Q3 2022, a period coinciding with double-digit inflation peaks and market turmoil.
- Unemployment has increased to 4.7% in the quarter ending May 2025, the highest rate since 2021.
- Inflation rose to 3.6% in June 2025, the steepest climb since January 2024.
- The survey captured responses from 3,200 consumers between June 13 and June 16, using questions covering job security, income outlook, debt, children’s welfare, and overall wellbeing.
What’s Behind the Dip in Confidence?
Celine Fenech, Deloitte’s consumer insight lead, shed light on the dynamics at play: "Concerns over a slowing labour market have sown doubt about job security and income growth. Coupled with persistent inflation and rising living costs, people feel the pinch, which drags down sentiment around personal debt and financial health."
The dipping confidence challenges the Labour government’s efforts to stabilize the economy amid rising inflation and shifting labour policies. Businesses have cited new employment taxes, a higher minimum wage implemented in April, and tougher planned regulations on employee dismissals as deterrents to hiring expansion, intensifying fears of a slowing job market.
Economic Context and Broader Implications
This drop in consumer confidence comes at a crucial moment. Previously, declines coincided with periods of intense economic stress, such as the Q3 2022 slump linked to inflation spikes and political upheaval during Liz Truss’ brief tenure as Prime Minister. This new downturn raises critical questions about the sustainability of economic recovery and the resilience of the UK workforce.
Deloitte chief economist Ian Stewart added context, saying, "While recent UK economic activity has slowed, business confidence is showing signs of staying resilient despite geopolitical headwinds. However, consumer sentiment is a vital metric that will dictate how soon that confidence translates into spending and growth."
What’s Next for UK Consumers and Policymakers?
- Labour Market Watch: Rising unemployment underscores a need for targeted policies to protect workers and stimulate job creation.
- Inflation Management: Tackling inflation remains paramount to easing household pressures.
- Business Environment: Balancing regulatory reforms with incentives for employers could be critical to reversing hiring hesitancy.
- Consumer Support: Programs addressing cost of living challenges and debt management may help restore confidence.
With inflation on the rise and labour market concerns mounting, Prime Minister Starmer’s administration faces a delicate balancing act to ensure that economic vulnerability doesn’t deepen, particularly for lower- and middle-income households.
Editor’s Note
This comprehensive survey reveals not just a temporary waver in consumer optimism but signals deeper undercurrents shaping the UK’s economic future. Beyond the numbers, these trends stress-test the government’s economic stewardship and raise urgent questions about social protections and employment policies. How effectively policymakers respond to these challenges could define the trajectory of the UK economy over the coming year—impacting millions of households and businesses alike.
Understanding consumer confidence is crucial for forecasting economic health and policy impact. This report encourages a closer look at the intersection of inflation, labor laws, and household wellbeing in driving public sentiment.
