A Decline in Consumer Confidence in the UK Economy
Recent worries about personal financial health and enduring fears regarding the UK economy’s state have resulted in a drop in consumer confidence, as revealed in a closely monitored survey.
Dip in Household Sentiment Index
GfK’s household sentiment index displayed a three-point drop to minus 19 in February from minus 16 in the previous month, according to the results disclosed on Friday. This is the lowest index reading since the November budget, even though analysts had predicted a reading of minus 15.
Declining Perceptions of Personal Finances
Over the past month, perceptions of personal finances have dwindled, causing a downward shift in the overall confidence index. Respondents of GfK’s survey expressed a reduced likelihood of making large purchases and a higher probability of saving less from their monthly income.
The latest poll by GfK, which has been conducting surveys since the 1970s, was completed before the release of the ONS data that showed a post-pandemic high in unemployment and a peak in youth joblessness not seen in 11 years.
Inflation and Personal Finances
Had the information been available prior to the survey, the drop in inflation from 3.4 percent to 3 percent in January, as stated by ONS, may have boosted the respondents’ confidence in their personal finances.
Forecasted Drop in Inflation
Inflation is projected to decrease to the target of 2 percent in April as a result of Ofgem, the energy regulator, announcing a reduction of £117 in the average household energy bill set to take effect from the same month.
Views on the Broader Economy
Despite the easing inflation rate, prices continue to rise, forcing many households to prioritize immediate spending over long-term needs, according to Neil Bellamy, GfK’s consumer insights director. Consumer expectations of economic growth this year remain minimal, with views on the larger economy holding steady in negative territory.
Fall in GfK’s Savings Index
Speculation that the Bank of England will lower interest rates multiple times this year has led to a seven-point decline in GfK’s savings index to 21 in February. The index has seen a fall of four times in 2025, to 3.75 percent from 4.75 percent.
Increased Optimism in UK Growth
Despite the monthly drop in the index, it remains significantly above the record low of -49 achieved in September 2022, post Liz Truss’s mini budget. Separate data published by Lloyds Bank, based on a businesses survey, showed an improvement in the outlook towards the economy. Optimism in UK growth jumped by eight points to 36 percent in February.
Indications of Momentum in the UK Economy
Recent data suggests that the UK economy gained momentum at the start of 2026. The composite purchasing managers’ index, which measures UK private sector activity, hit a 22-month high; retail sales increased by 1.8 percent in January, and UK government borrowing costs reached their lowest point in approximately a year. Additionally, the FTSE 100 has consistently set new record highs.
Upcoming Economic Forecasts
Next Tuesday, as part of Rachel Reeves’s spring statement, the Office for Budget Responsibility will publish economic forecasts for the upcoming years, which are unlikely to include changes in tax and spending.
Impact of Prior Budgets on Real Wage Gains
In Reeves’s first two budgets, taxes were increased by £40 billion and £26 billion, partially offsetting a long stretch of real wage gains. However, the removal of green levies from energy payments, which was announced at the November budget, will reduce energy bills starting this spring. In addition, rail fares have been frozen for the first time in three decades by Reeves.
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