UK Consumer Confidence Edges Up Despite Fragile Recovery.

UK consumer confidence rose for the second straight month, reaching -18 in June, its most positive reading since December. However, the rebound is fragile due to rising consumer prices, higher taxes, and a worsening labor market, as well as factors such as the conflict in the Middle East and President Trump's trade war. Despite this, consumers became more optimistic about the year ahead and spending intentions improved slightly.

UK consumer confidence rose for the second consecutive month in June, reaching -18, its most positive reading since December, according to a survey by GfK [1]. This improvement, however, is fragile and could be derailed by several factors, including rising consumer prices, higher taxes, a worsening labor market, and geopolitical tensions.

GfK’s gauge of sentiment rose by two points from May, driven by increased optimism about the year ahead and a slight improvement in spending intentions. Nevertheless, households continue to grapple with rising costs and uncertain economic prospects. Neil Bellamy, consumer insights director at GfK, warned that consumer confidence remains "fragile" [1].

The conflict between Israel and Iran has significantly driven up oil prices, further exacerbating inflationary pressures. Additionally, US President Donald Trump’s trade war has disrupted international trade, creating additional headwinds for the UK economy. These factors could jeopardize the improvements seen in the June survey, which found that consumers turned more optimistic about the outlook in the year ahead and registered a slight improvement in their spending intentions [1].

The Confederation of British Industry (CBI) also slashed its forecast for UK economic growth in 2025 and 2026 due to these headwinds. The CBI cut its 2025 growth estimate to 1.2% from 1.6% and its 2026 growth forecast to 1.0% from 1.5% [2]. The CBI attributed the downgrade to labor cost increases, payroll taxes, and the impact of US tariffs on business activity.

The Bank of England (BOE) is under pressure to push ahead with more interest-rate cuts following a series of weak economic data releases. Market bets show an 80% chance of a rate cut in August, with two reductions by the end of 2025 almost fully priced in [3]. The BOE is expected to maintain rates at 4.25% this week, but there is a minority view favoring a quarter-point reduction.

In conclusion, while UK consumer confidence has shown signs of improvement, the economic outlook remains uncertain and challenging. Rising costs, taxes, and geopolitical tensions pose significant risks to the fragile recovery. Investors and financial professionals should closely monitor these developments and adjust their strategies accordingly.

References:
[1] https://www.bloomberg.com/news/articles/2025-06-19/uk-consumer-confidence-rises-extending-a-fragile-rebound
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L8N3SK198:0-us-tariffs-tax-hikes-to-depress-uk-growth-this-year-and-next-cbi-forecasts-show/
[3] https://www.bloomberg.com/news/articles/2025-06-16/dire-uk-data-ramp-up-pressure-on-boe-to-keep-cutting-rates