UK Consumer Confidence Weakens as Retailers Warn of Rising Costs Ahead of Budget
Economic and personal-finance sentiment fell in October as shoppers braced for higher grocery bills and retailers called for cost relief.
Retailers are heading into the Budget with two pressures pulling in opposite directions: consumers expect to spend more in the run-up to Christmas, yet their view of the economy and their own finances is deteriorating. The British Retail Consortium’s October figures point to a household spending outlook increasingly shaped by higher prices, while retailers say rising business costs are limiting their ability to absorb further pressure.
Confidence in the UK economy fell from -32 to -40 in October, the third consecutive monthly decline in the BRC index. Expectations for personal finances over the next three months also weakened, moving from -15 to -18. The BRC described that reading as the second-lowest on record.
Those measures suggest that consumers are feeling less secure even as some expect their spending to rise. The net reading for spending expectations increased from five to 15 in October. That may reflect planned seasonal purchases ahead of Christmas, but the BRC said rising inflation had worsened the outlook. A stronger spending intention reading, on its own, doesn’t show that households feel more financially comfortable: higher grocery and household bills can push expected outlays up even as confidence falls.
Food costs add to household pressure
Price data have sharpened those concerns. Consumer price inflation rose from 3.1 to 3.5 per cent in the year to September, a larger increase than economists had expected, as reported on Wednesday. Inflation measures the pace of price increases; it doesn’t mean that prices have returned to earlier levels. For households already paying more for essentials, a renewed acceleration can make budgeting harder and leave less room for discretionary purchases.
Grocery expectations show how directly that pressure may be felt. In October, 36 per cent of shoppers expected to spend more on groceries over the next three months, up from 28 per cent in September. That shift indicates more households anticipate higher food bills. It doesn’t establish how much each household will spend, but it points to food costs becoming a larger concern as the festive period approaches.
Supermarket executives say they are working to contain energy and supply costs. At the same time, industry figures have forecast food inflation reaching 6.4 per cent by July next year. That forecast signals the risk facing shoppers and food businesses if cost pressures persist; it is not a guarantee that prices will rise by that amount in every category. For retailers, the difficulty is that keeping shelf prices down can squeeze margins, while passing costs on can further strain household budgets.
Retailers make their case on operating costs
Helen Dickinson, the BRC’s chief executive, called on the Chancellor to address the cost-of-living challenge in the coming Budget. She urged action on what she described as a “tsunami of costs” affecting retailers, including employer National Insurance Contributions and business rates. Her argument is that reducing pressure on shops could give households more room through lower prices or help retailers sustain their operations.
Dickinson said retailers were doing what they could to limit price increases, but described a 20 per cent rise in tax on the industry across two years as leaving businesses with “no more room for manoeuvre”. The figure frames the BRC’s case for relief; the source does not break down the increase by retailer or explain how costs vary across the sector. The effect on any individual business will depend on its cost base, sales and capacity to absorb higher expenses.
Retail executives have recently called for high street shops to be excluded from the highest business rates multiplier and for recent increases to employer National Insurance Contributions to be rolled back. Those requests reflect a wider commercial trade-off: taxes and employment costs can affect decisions about staffing, investment and pricing. Their eventual effect on consumer prices would depend on how businesses respond, so cost relief would not automatically translate into lower bills.
Retailers also link higher payroll expenses to hiring decisions. They say increases to employer National Insurance Contributions, together with minimum wage rises above inflation, are making it harder to invest in jobs. That concern has particular relevance for younger people who are not in education, employment or training, though the source provides no figures quantifying how many jobs or placements might be affected.
Thierry Garnier, chief executive of B&Q owner Kingfisher, wrote in City AM last week that the company’s work experience placements for young people “depends on what the Chancellor decides in this Budget”. His comment makes the potential impact concrete for one employer: spending decisions could reach beyond shop prices and staffing to early work experience opportunities. The scale of any change remains uncertain, since it depends on the Budget and on how Kingfisher chooses to respond.
What the Budget could change
The figures capture competing signals rather than a clear turn in household demand. Spending expectations rose in October, but economic confidence and personal-finance expectations both worsened, while more shoppers anticipated higher grocery bills. Retailers face the same tension from the business side: they want to protect affordability, but say operating costs are narrowing the room to do so.
The Budget is therefore a near-term test of whether the Chancellor’s decisions change the cost pressures retailers cite. For households, the practical indicators will be whether food inflation continues to rise and whether shops can contain prices. For businesses, employment costs and business rates will shape decisions on hiring, investment and the extent to which higher expenses reach customers.
