Consumer confidence suffers biggest drop in four years

Consumer confidence fell at the fastest rate in four years as Brits tightened their purse strings amid fears the Iran war will spike inflation. 

Brits’ confidence in their spending power fell by three per cent at the start of this year, as it reached its lowest level since 2023 and made the biggest drop since 2022.

The Iran war – and the surging energy and supply chain costs caused by the blockage of the Strait of Hormuz – have sparked fears that inflation could ravage the UK’s economy.

Confidence plunged in five of the six measures used by consultancy firm Deloitte at the start of this year, including a 7.2 per cent drop in Brits’ feelings about their disposable income.

This measure is down more than nine per cent year on year, having declined at the fastest rate since 2022.

Economic sentiment plummets

Brits also fear for their job security, with this index falling 2.1 per cent compared to the end of 2025 and 6.2 per cent year on year.

Consumer attitudes about the state of Britain’s economy, which is measured separately, fell by a massive 13.5 per cent at the start of this year, returning to lows not seen since 2022 – when the UK was last in the midst of an energy crisis.

Retailers and hospitality firms fear that Brits will cut back non-essential spending as they brace for growing inflation.

Before the Iran war broke out analysts had been expecting the Bank of England to make several cuts to interest rates this year but the market is now bracing for multiple hikes.

Brits slash non-essential spending

Deloitte says consumer spending on non-essential items fell by 6.7 per cent compared to the end of last year and is down 6.6 per cent year on year.

Spending on alcohol and cigarettes is down the most – 15 per cent since the end of 2025 – while outgoings on clothing and footwear have fallen by 11 per cent.

The blockage to the Strait of Hormuz during the Middle East conflict sent supply chain and energy costs into a tailspin, as retailers like Sainsbury’s and Next warned they will have to raise prices.

Céline Fenech, head of consumer insight at Deloitte, said: “The impact of recent geopolitical events on the price of energy will likely feel like another setback for consumers. 

“Many were already facing a squeeze on their household budgets at the start of the year with the slowing of wage growth and a cooling jobs market.”