New research from Barclays has revealed a significant downturn in UK consumer confidence, creating concerns for retailers in the crucial run-up to Christmas.
Sharp Decline in Economic Confidence
The high street bank's latest Consumer Spend report shows that all seven measures of consumer and economic confidence tracked fell in October, marking the first simultaneous decline since August 2022. This worrying trend comes as British households face continued financial pressure during the cost of living crisis.
According to the research, which analyses hundreds of millions of customer transactions combined with consumer surveys, two in five consumers (41%) are actively adjusting their finances ahead of the upcoming Autumn Budget. Within this group, 37% are making cutbacks to reduce spending, 33% are postponing discretionary purchases, and 30% are building up their savings as a buffer.
Spending Freeze Before Budget Announcement
The data reveals that one in three shoppers (33%) are holding off on major purchasing decisions until after the government's Budget announcement. This hesitation is particularly pronounced among younger consumers, with 44% of Gen Z delaying significant financial commitments.
Julien Lafargue, Chief Market Strategist at Barclays Private Bank and Wealth Management, commented: "Consumers and businesses alike appear to have adopted a 'wait and see' approach ahead of the Autumn Budget. While this is generating some short-term headwinds, it could position the UK economy for a rebound once the uncertainty lifts, potentially setting the stage for a strong festive season."
Retail Sector and Shrinkflation Concerns
The retail sector recorded its steepest decline since November 2024, with both department stores and discounters experiencing reduced activity. Consumers are increasingly noticing the effects of shrinkflation and skimpflation, particularly on seasonal treats.
Two thirds of shoppers report their festive favourites are getting smaller despite price increases, with chocolate being the most commonly cited product affected by both reduced size and quality.
Karen Johnson, Head of Retail at Barclays, noted: "Looking ahead to the Autumn Budget, consumers are taking a considered approach to spending. While confidence declined in October, we're seeing resilience within categories linked to health and wellbeing, suggesting people are still willing to invest in the areas that matter most to them."
She added that with Black Friday and Christmas approaching, spending patterns are expected to shift again as shoppers actively seek out value and seasonal promotions.
