British consumers have turned a bit more confident this month after the latest interest rate cut by the Bank of England but are still vulnerable to worries about rising inflation and potential tax increases, a survey showed on Friday (Aug 22).
The August reading of market research firm GfK's consumer confidence index rose to its highest since December at -17, up from -19 in July, boosted by a three-point improvement in households' sentiment around their personal finances.
"Consumer confidence continues to move in a very narrow band, and there's no sense that it is about to break out into fresher, more optimistic territory," Neil Bellamy, consumer insights director at GfK, said.
"The UK's consumers are still in wait-and-see mode, and any surprises could result in sudden and sharp changes in sentiment,.
“The improved sentiment on personal finances is welcome, but there are many clouds on the horizon in the form of inflation — the highest since January 2024 — and rising unemployment. There’s no shortage of speculation, too, about what the autumn budget will bring in terms of tax rises," Bellamy said.
He added that households were in “wait-and-see mode, and any surprises could result in sudden and sharp changes in sentiment”.
He pointed to data this week which showed inflation rose to 3.8% in July and media reports of possible tax increases at finance minister Rachel Reeves' autumn budget as possible drags on confidence in the coming months.
GfK's measure of savings dropped by four points to +30 in August from its highest level since 2007 in July.
The GfK survey was based on a poll of 2,002 individuals aged 16 conducted between August 1 and August 14.
The rise in consumer confidence is also linked to the Office for National Statistics report stating that the economy expanded by 0.3 per cent in the three months to June, better than expected.
The findings were based on a survey of 2,002 adults carried out between August 1 and 14, before data from the ONS showed that inflation leapt to 3.8 per cent in July, the highest reading since January 2024.
Speculation about further tax increases at Rachel Reeves’s autumn budget also gathered momentum in the days after the GfK survey concluded.