UK consumer confidence up but fragile amid tariff and Middle East concerns
Confidence among UK consumers has improved but remains fragile in the face of expected petrol price rises amid escalating conflict in the Middle East, according to a leading index.The latest snapshot from the data company GfK says sentiment improved by two points in June but remained in negative territory at -18, well below the -12 of a year ago.A reading above zero indicates optimism; below indicates pessimism.The last time the headline index, which is closely watched by the government and the Bank of England, was positive was in January 2016, when it was at 4.It has had double-digit negative readings since September 2021 when Britain was in the grip of Covid-19.
Last month, sentiment hit its lowest level since November 2023 as a combination of domestic tax increases, rising bills and worries over Donald Trump’s trade wars weighed on minds.Consumers became more optimistic about the overall economy this month, with scores up three points when judging how the past year went, and up by five points when looking at the next 12 months.However, both measures were firmly stuck in negative territory, at -43 and -28 respectively.Assessments of personal financial situations were unchanged, with the score for the past 12 months at -7 and the measure looking ahead was in positive territory, at 2.Neil Bellamy, consumer insights director at GfK, said: “Consumers have been resolute in their views on their wallets, with June’s personal financial situation scores (past and future) unchanged from May.
Yet confidence is still fragile because the dark shadow of inflation is a day-to-day challenge for so many of us,”The cost of filling up a car started creeping up this week when crude oil prices rose sharply after Israel’s attack on Iran,A litre of petrol now costs 132,8p while diesel is at 138,9p, according to the AA motoring group.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said: “Looking ahead, consumer confidence will likely be squeezed by gradually easing wage growth while inflation remains at about 3,5% for the rest of the year, and unemployment will likely creep up,“The prospect of tax increases in the October budget could also weigh on households,But real income should continue eking out gains given that average earnings rose 5,5% year-over-year in March.
We also expect unemployment to rise only modestly to a peak of 4.9%.”Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotionGen Z is driving improvements in confidence, with younger generations the most optimistic about the future, a separate survey from the British Retail Consortium showed on Thursday.Consumer sentiment improved for the second month in a row to the highest level since Christmas but remained in negative territory.“This rising optimism may also reflect the increase in minimum wage from April, with many younger people expected to have seen a significant uplift in their pay packet,” said Helen Dickinson, the BRC’s chief executive.
“Expectations of future spending – both in retail and more generally – rose slightly, with more spending on groceries planned over the coming months.”
UK manufacturing set for a funding boost to reduce energy costs
UK manufacturing is expected to receive support to ease energy costs and boost skills, the Guardian understands, as part of a long-awaited industrial strategy due to be unveiled next week.Energy-intensive industries have long complained that they pay too much for electricity compared with competitors in the EU, while the wider industrial sector has struggled to recruit skilled staff.As Nigel Farage’s Reform party targets support in Britain’s industrial heartlands, ministers are poised to pour funds into boosting the manufacturing workforce with proposals similar to a £600m package for the construction sector announced earlier this year, which underpins plans to build 1.5m homes.Ministers have drawn up plans to take aim at energy costs through two policies, one targeted at businesses that use the most electricity – such as steel and aluminium – and another designed to support manufacturing more broadly
Thames Water renationalisation plans being stepped up, says minister
The environment secretary, Steve Reed, has said the government is stepping up preparations for temporary nationalisation of Thames Water, indicating it will reject pleas from the company’s creditors for leniency from fines and penalties.Thames Water’s largest creditors control the utility and have made a bid to cut some of its debts and provide £5.3bn in new funding to try to turn it around.However, the creditors have said their plan needs considerable leniency from the water regulators Ofwat and the Environment Agency over fines for environmental failings.The Guardian this month revealed that the creditors had asked for immunity from prosecution for serious environmental crimes in return for taking on the company
Ministers set out plans to spend £725bn on UK infrastructure over 10 years
Ministers have pledged to spend £9bn a year on fixing crumbling schools, hospitals, courts and prisons over the next decade as part of the government’s infrastructure strategy.Darren Jones, the chief secretary to the Treasury, set out plans on Thursday to spend a minimum of £725bn over 10 years to boost UK-wide infrastructure and achieve a “national renewal”.Jones announced that £6bn a year would go to repairing hospitals in England, £3bn to fixing and upgrading schools and colleges in England and £600m to courts and prisons in England and Wales.The money will fund building improvements including removing crumbling reinforced autoclaved aerated concrete (Raac) in hospitals and strengthening safety and security in prisons.Jones told MPs: “Done properly it will result in tangible improvements to the fabric of our country, our local roads and high streets renewed so communities are even better places to live
Bank of England warns of ‘elevated’ global uncertainty after leaving interest rates on hold – as it happened
Newsflash: The Bank of England has left UK interest rates on hold at 4.25%.The decision, which matches City expectations, comes as the Bank weighs up the risks to the UK economy from US trade wars and the conflict in the Middle East, which has pushed oil prices higher in the last week.But it’s a split decision – with six of the nine policymaker’s voting to hold, and three voting for a cut.Details and reaction to follow
Bank’s rate decision leaves frustrated Reeves praying for an August cut
Last week’s spending review revealed Rachel Reeves’s plan for reviving the UK’s struggling economy – but one of the most powerful levers for unleashing growth lies out of her reach, at the Bank of England.Thursday’s no-change decision on interest rates from the Bank’s nine-member monetary policy committee (MPC) was widely expected; but the chancellor and her colleagues will be fervently hoping for a cut in August, perhaps sooner – and more before the year is up.The Bank’s governor, Andrew Bailey, had already warned the pace of rate cuts looked uncertain, as a result of Donald Trump’s trade wars. The alarming prospect of a fresh conflict in the Middle East is likely to have made MPC members even more cautious.The minutes from Thursday’s meeting suggested the MPC would “remain sensitive to heightened unpredictability in the economic and geopolitical environment,” and would “continue to update its assessment of risks to the economy”
Bank of England keeps interest rates at 4.25% but hints at cuts to come
The Bank of England has left interest rates on hold at 4.25%, though it signalled further cuts in the cost of borrowing later this year after “clearer evidence” of rising unemployment amid a slowing economy.Six members of the Bank’s nine-member monetary policy committee (MPC) voted to keep rates on hold while three supported a reduction to 4%, to add to the four quarter-point cuts since last August.The Bank’s governor, Andrew Bailey, said interest rates “remain on a gradual downward path” after “seeing signs of softening in the labour market”. He cautioned, however, that the world was “highly unpredictable” and it was difficult to predict when interest rates would next be reduced
Australian supermarket tahini taste test: one of the worst is ‘thick enough to build a sandcastle’
The secret to crisp tofu | Kitchen aide
José Pizarro’s recipe for broad bean and mint tortilla with a manchego crust
Rukmini Iyer’s quick and easy recipe for tandoori chicken skewers with coriander chutney | Quick and easy
Pastry perfection: Anna Higham’s recipes for chicken and herb pie and foldover pissaladière
How to make chocolate chip cookies – recipe | Felicity Cloake's Masterclass