‘Painful’ Budget warning spooks people’s confidence

According to GfK’s barometer, people’s view of their own personal finances in the future has also turned negative again, down nine points to -3.

Other measures of consumer confidence have dipped too and overall, the main index fell by seven points to -20.

Nick Glynne, the boss of Buy It Direct Group claimed that the business, which sells big ticket home appliances and furniture online, had seen a 9% drop in website traffic “since the doom and gloom promoted by Keir Starmer”.

“It’s almost a perfect map between when the government started announcing the likelihood of bad news in the budget and the drop in demand,” he told the BBC’s Today programme.

He said there was a “feeling that the budget is going to take money out of people’s pockets with tax rises”, but added there were other factors impacting the business including customers being worried about mortgage costs.

“We’re hoping that the government has overplayed their hand a bit, or overplayed it to manage expectations and that come November we will hopefully benefit from continued drop in mortgage rates,” Mr Glynne said.

The fall in consumer confidence was unexpected as it came in the aftermath of an interest rate cut from the Bank of England to 5% in August, potentially easing the pressure faced by some households. On Thursday, the Bank pointed to further cuts to borrowing costs, albeit “gradually”.

Inflation, which measures the pace at which prices are rising, has also fallen sharply and held steady at 2.2% in August, just above the Bank’s 2% target.

“Despite stable inflation and the prospect of further cuts in the base interest rate, this is not encouraging news for the UK’s new government,” said Neil Bellamy, consumer insights director at GfK.

He suggested that following the withdrawal of winter fuel payments and warnings of “further difficult decisions” to come on tax, spending and welfare, consumers are “nervously” awaiting the upcoming Budget on 30 October.