Nearly £1 billion was wiped from the stock market value of Britain’s biggest retailers on Tuesday after Deutsche Bank warned of a sharp decline in consumer confidence in the run-up to the government’s autumn budget.
The bank’s “fear index” suggested rising anxiety across all income groups, with shoppers increasingly worried about job security, frozen tax thresholds, and the likelihood of further fiscal tightening under Chancellor Rachel Reeves. Analysts said households are pulling back on discretionary spending despite recent wage growth, with many opting to save more amid mounting uncertainty.
The warning triggered steep falls across the retail sector. Associated British Foods (ABF), owner of Primark, was downgraded to “sell” and saw shares drop 92p, or 4 per cent, to £22.22 – its worst performance since April. DIY retailers were among the hardest hit, with Wickes plunging 8.6 per cent to a three-month low of 201.5p after also being downgraded to “sell.” Kingfisher, the parent company of B&Q, was cut to “hold” and shed 4.3 per cent to 269p.
Home improvement supplier Marshalls, though not mentioned in Deutsche Bank’s note, still lost 3.2 per cent, closing at 182.25p – its weakest level in a decade. Next, placed on Deutsche’s “least preferred” list, eased 0.2 per cent to £122.05, while online fashion group Asos slipped 1.6 per cent to 302p. Combined, the six companies lost around £965 million in market capitalisation.
Unusually, Deutsche Bank’s survey found higher-income households more pessimistic than lower-income groups, with wealthier consumers bracing for possible tax increases in October’s budget. Meanwhile, poorer families remain under pressure from stubbornly high prices. Inflation rose to 3.8 per cent in July, according to the Office for National Statistics, fuelled by a 4.9 per cent surge in grocery costs – the fastest rise since February. The Bank of England has warned food inflation could exceed 5 per cent in the months ahead.
Frozen personal tax thresholds and a £25 billion rise in employers’ national insurance contributions are also weighing on businesses and the labour market. Data from Asda and the Centre for Economics and Business Research (Cebr) highlighted the strain on households: middle-income families saw their disposable incomes shrink by 1.6 per cent in July, the first drop since September 2023. The impact on the lowest-income households was more severe, with disposable incomes plunging 11.1 per cent, leaving an average shortfall of £73 once essentials and taxes were covered.
“While wages are expected to rise over the remainder of the year, persistently high inflation will put continued pressure on household budgets,” said Sam Miley, head of forecasting at Cebr.
With consumer spending already fragile, analysts warn that fresh tax rises in the autumn could deepen the downturn, further squeezing retailers and households alike. For Britain’s high streets, the prospect of high inflation, weak confidence, and tighter fiscal policy is once again raising fears of a difficult winter ahead.
