Consumer confidence in the UK saw a modest improvement in March, rising by one point to -19, according to the latest GfK index. The figure outperformed analysts’ expectations of a drop to -21, but experts warn that there is still little sign of a meaningful recovery as households continue to navigate economic uncertainty.
The marginal rise was attributed to a slightly more positive assessment of the economy’s performance over the past year and cautious optimism for the months ahead. However, the survey was conducted before the Office for National Statistics (ONS) reported a 0.1% contraction in GDP for January, dampening hopes of sustained growth.
Confidence Still Below Historical Averages
While consumer sentiment has recovered from record lows seen during the peak of the cost-of-living crisis in late 2022, it remains significantly below the long-term average of -10.
Neil Bellamy, consumer insights director at NIQ GfK, likened the current sentiment to that of a hospital patient struggling to recover. “If consumer confidence were a patient languishing in a hospital bed, a doctor would say there is little evidence of a recovery as yet,” he remarked.
Consumer confidence is a key economic indicator, reflecting public perceptions of household finances, job security, and the broader economy. Despite wage growth outpacing inflation for the past 18 months, March saw a slight decline in expectations for personal finances over the next year.
Savings and Spending Patterns Shift
GfK’s separate savings index fell by five points to 25, suggesting that some households may be dipping into their savings to maintain spending. While this could provide a temporary boost to retailers, it also signals potential financial strain in the longer term.
Meanwhile, the Bank of England held interest rates steady at 4.5% last week, with an 8-1 vote by the Monetary Policy Committee in favor of no change. Although rates have been cut from the peak of 5.25% last year, they remain significantly higher than the levels seen over the past 15 years, encouraging saving over spending.
Retail sales saw a 1.7% increase in January, according to the ONS, but business confidence has begun to wane. Indicators such as the Purchasing Managers’ Index point to weakening employer sentiment and a slowdown in hiring, which has been partially linked to Chancellor Rachel Reeves’s decision to raise national insurance contributions for employers by £25 billion.
Geopolitical and Policy Uncertainty Loom
Global uncertainty is also weighing on consumer confidence. The Bank of England recently warned that renewed tariff threats and protectionist policies from U.S. President Donald Trump have intensified market volatility, creating additional risks for UK economic growth.
With Chancellor Reeves set to announce further public spending cuts in Wednesday’s Spring Statement, economic pressures on households could increase in the coming months, testing both consumer resilience and the broader economic recovery.
