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Consumer confidence edges up in March but recovery remains elusive

March 24, 2025

UK consumer confidence saw a marginal improvement in March, rising by just one point to -19, according to the latest GfK index.

While the figure beat analysts’ expectations of a fall to -21, experts warned there is still “little evidence of a recovery” as households remain cautious in the face of persistent economic pressures.

The slight uptick was largely driven by a more positive view of the economy’s performance over the past year and cautious optimism for the year ahead. However, the survey was conducted before the Office for National Statistics (ONS) revealed that GDP shrank by 0.1 per cent in January, tempering hopes of sustained momentum.

Although the consumer confidence index has recovered somewhat from its record lows during the peak of the cost of living crisis in late 2022, it remains well below the long-term average of -10.

Neil Bellamy, consumer insights director at NIQ GfK, likened the current state of sentiment to a hospital patient. “Consumer confidence remains subdued… If [it] were a patient languishing in a hospital bed, a doctor would say there is little evidence of a recovery as yet,” he said.

Consumer sentiment is a critical barometer for economists, reflecting public perceptions of household finances, job security, and the broader economic climate. Despite wage growth outpacing inflation for the past 18 months, March saw a slight dip in personal finance expectations for the year ahead.

GfK’s separate savings index also fell, dropping five points to 25, which could suggest that some households may be willing to dip into savings to maintain spending — a potentially short-term boost for retailers but a sign of longer-term financial strain.

The Bank of England, meanwhile, held interest rates steady at 4.5 per cent last week, with the Monetary Policy Committee voting 8-1 in favour of no change. Despite three rate cuts since the peak of 5.25 per cent last year, borrowing costs remain significantly higher than the levels seen over the past decade and a half — incentivising saving over spending.

Retail sales rose 1.7 per cent in January, according to the ONS, but business sentiment has started to falter. Separate indicators, including the Purchasing Managers’ Index, have shown weakening confidence among employers and a slowdown in hiring intentions — partially attributed to Chancellor Rachel Reeves’s £25 billion increase in national insurance contributions for employers.

Further pressure on consumer sentiment may come from wider geopolitical developments. The Bank of England this week warned that renewed tariff threats and protectionist signals from US President Donald Trump had “intensified” global uncertainty, heightening market volatility and posing risks to UK growth.

With Reeves expected to announce additional public spending cuts in Wednesday’s Spring Statement to shore up fiscal headroom, the coming months may test the resilience of both household confidence and broader economic recovery.