Liz Truss’ cost-of-living support fails to prevent further dip in UK confidence

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Friday, September 23, 2022 6:00 a.m.

Liz Truss (Photo by Dan Kitwood/Getty Images)

Liz Truss’ cost-of-living support has done nothing to lift Britons’ optimism from the doldrums, a closely watched survey released today reveals.

Consumer confidence has plummeted five points in the past month to minus 49, the lowest since research firm GfK started tracking the numbers in 1974.

The survey was carried out between early and mid-September, meaning it captured household response to the Prime Minister’s announcement on September 8 that energy bills will be frozen for two years at £2,500 from October.

Consumers are being crushed by inflation that has hovered around a 40-year high for several months, tax hikes and rising interest rates.

British consumer confidence has plummeted this year

Consumer confidence plummeted to new record low despite Liz Truss raising cost of living support
Consumer confidence has been negative since the Brexit vote (Source: GfK)

Prices rose 9.9% from a year ago, forcing the Bank of England to approve a second consecutive 50 basis point rate hike yesterday, taking borrowing costs to 2.25%, the highest since November 2008.

Such movements are rare. In its 25 years of independence, the Bank has never raised rates by more than half a percentage point.

“Consumers are caving in under the pressure of the UK’s growing cost of living crisis, driven by rapidly rising food prices, household fuel bills and mortgage payments,” said Joe Staton, director of customer strategy, GfK.

The main indicators of the survey fell sharply.

Confidence in Britain’s economy over the next year fell eight points to minus 68, while Britons’ optimism about their future personal financial situation fell nine points to minus 40.

Bank Governor Andrew Bailey and the rest of the Monetary Policy Committee warned yesterday that Britain may already be on the brink of a technical recession, defined as two consecutive quarters of GDP contraction.

Truss Chancellor Kwasi Kwarteng will inject further support for the UK economy into a mini-budget today.

It is expected to reverse the six percentage point rise in corporation tax and reduce stamp duty. Yesterday the government confirmed that the 1.25 percentage point hike in National Insurance would be reversed on November 6 and the Health Care and Social Services Tax would be scrapped.

Taxpayers already pay household energy bills and half of business gas and electricity costs.

GfK’s consumer confidence index has been negative since the Brexit referendum.

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