UK Consumer Confidence Sinks to Lowest Since Cost-of-Living Crisis: What Investors Need to Know

The UK’s consumer confidence has plummeted to its lowest level since the peak of the cost-of-living crisis in late 2022, according to the latest GfK Consumer Confidence Barometer. The index dropped to -23 in April 2025, marking a stark reversal of earlier optimism and underscoring the fragility of household finances amid rising costs and inflation fears. This decline poses significant risks for sectors reliant on consumer spending, from retail to discretionary goods.

The Data in Detail: A Widespread Downturn

All five components of the GfK index declined in April, painting a bleak picture of household sentiment:
- Personal Finances (Future 12 Months): Expectations worsened by four points to -3, the weakest since mid-2023.
- General Economic Outlook: Confidence in the broader economy fell eight points to -37, the lowest since March 2023.
- Major Purchases: The willingness to spend on big-ticket items dropped to -19, though this remains slightly better than April 2024.

The savings index, while not part of the main score, rose to +30, suggesting households are prioritizing savings over spending—a defensive move that could further crimp retail demand.

Key Drivers: Cost Pressures and Inflation Fears

The decline stems from immediate financial burdens and lingering uncertainty. April saw hikes in utilities, council tax, and road tax, while fears of renewed inflation—fueled by U.S. tariffs on UK goods—have eroded confidence. Despite a slight dip in March’s inflation rate to 2.1%, the GfK report warns that a resurgence could push confidence “to new lows.”

Historical Context: A Reversal of Progress

The April slump contrasts sharply with 2024’s modest rebound. In June 2024, confidence hit -14, the highest since late 2021, driven by improved attitudes toward personal finances and retail spending. However, the current decline underscores how quickly sentiment can sour when cost pressures resurface. The index now sits just 26 points above its record low of -49 in September - October 2022.

Implications for Investors: Sectors Under Pressure

The data suggests caution for investors in consumer-facing sectors:
1. Retail and Consumer Discretionary: Stocks in sectors like apparel, electronics, and furniture may face downward pressure as households delay non-essential purchases.
2. Energy and Utilities: Companies in these sectors could see volatility as cost hikes—already driving consumer dissatisfaction—continue.
3. Defensive Plays: Sectors like healthcare or consumer staples may offer stability, while savings-focused firms could benefit from the rise in savings confidence.

Conclusion: A Cautionary Tale for Consumer-Driven Growth

The April 2025 confidence collapse signals a critical turning point for the UK economy. With households bracing for further cost increases and inflation risks looming, consumer spending—a key growth driver—could stagnate or decline. Investors should prioritize defensive assets and sectors insulated from discretionary demand while monitoring inflation trends and policy responses.

The data is clear: confidence is now at its weakest since early 2023, and if inflation resurges as feared, the UK could face a prolonged period of economic fragility. For now, the message to investors is straightforward: proceed with caution in consumer markets and stay vigilant for signs of stabilization—or further decline.