The Middle East conflict has prompted a major shift in UK household spending intentions as a “ripple of fear” has taken hold, according to a respected measure of consumer confidence.
The monthly reading taken by data specialist GfK showed a leap in the number of those hoarding cash and avoiding big spending commitments as rising global energy prices put pressure on already squeezed budgets.
The survey noted a six percentage point decline in confidence about the economy over the next 12 months amid warnings the war will deliver price hikes across a growing number of goods and services in the coming months.
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Food is tipped to soon strongly reflect the hike in essential bills, following on from the fuel price shock witnessed within days of US-Israeli strikes on Iran.
There have also been forecasts the energy price cap will follow fixed rate deals up from July when it is first able to reflect the horrific oil and natural gas prices prompted by the war.
The latest market data on Friday showed that Brent crude oil remained above the $100 a barrel level at $1007 – up by almost 40% in the month to date. UK gas costs are more than 75% higher.
The country has had a cost of living problem since 2022 when Russia’s invasion of Ukraine sparked a more intense energy-led inflation crisis.
The government has made tackling the resulting decline in living standards its top priority.
But the scale of the challenge was laid bare on Thursday when a new government measure found that 13.4 million people, including just over four million children, were living in poverty in the UK in 2024/5.
The public finances, hurt by help for homes and businesses during the costly COVID pandemic and subsequent Ukraine war bailout, are unable to provide further universal support, according to the chancellor.
Rachel Reeves told MPs this week that help for energy bills will be limited to those who can least afford them.
Recent forecasts have suggested the price cap may rise by more than £300 on an average annual basis from July, though that sum is likely to rise the longer the hostilities in the Middle East continue.
A report by the OECD (Organisation for Economic Co-operation and Development) saw UK inflation at 4% by the year’s end though it did not believe the Bank of England would need to respond to the crisis by raising interest rates.
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Neil Bellamy, consumer insights director at GfK, said of the mood: “A ripple of fear is spreading as is evident from the six-point fall in perceptions of the general economic situation over the next 12 months, and also in the four-point drop in the major purchase index.
“People simply do not feel the economy is robust enough to ride out the knock-on effects from the Middle East conflict.
“Moreover, the decline in purchasing intentions, coupled with a six-point rise in the savings index, indicates people are holding on to their money and avoiding making major purchases while they wait to see what the medium-term impact of the conflict will be.”
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