Beleaguered Rachel Reeves has received a fresh setback as figures show a sharp slump in consumer confidence in a sign that ‘people see dark days ahead’.
It added to the gathering gloom over the economy at the start of the year as supermarket chain Sainsbury’s yesterday revealed a cull of 3,000 jobs while cut-price retailer Primark said its sales were suffering.
With growth stagnant and inflation turning higher, the Chancellor has jetted to the World Economic Forum in Davos to try to drum up investment from global bosses.
During the meetings she has repeatedly insisted on her commitment to growth and that she is taking on regulators getting in the way of business.
But critics say it is her own policies, in particular the £25billion raid on employer national insurance that stunned business, that are doing the biggest damage – and that there has so far been little sign of the promised drive to boost the economy.
Today, a closely-watched new survey by data firm GfK reveals that the gloom is now feeding through to ordinary households. It showed that consumer confidence has this month dropped to its lowest level since December 2023.
Neil Bellamy, GfK’s consumer insights director, said: ‘New Year is traditionally a time for change, but looking at these figures, consumers don’t think things are changing for the better.’
The poll revealed notable falls in households’ views on the wider economy.
‘These figures underline that consumers are losing confidence in the UK’s economic prospects,’ said Mr Bellamy.
There was also a big jump in a measure of savings intentions.
‘This sharp increase is unwelcome because it’s another sign that people see dark days ahead and are therefore thinking of putting money aside for safety,’ Mr Bellamy added.
In another blow, a separate report from the Confederation of British Industry (CBI) found British factories continued to struggle at the start of 2025 as optimism among manufacturers sagged to its lowest level in over two years.
‘Manufacturers have entered the new year in a grim mood. Confidence has evaporated over the last three months as orders have dropped,’ said Ben Jones, lead economist at the CBI.
Ms Reeves insisted during a Wall Street Journal event in Davos that the government was ‘proudly pro-business’ and was forced once again to defend the Budget, claiming there was ‘no serious alternative’ to her actions.
‘I’m not going to apologise for putting our public finances on a firm footing,’ she said. ‘It was the Budget that was necessary.’
The Chancellor said the government was now embarking on reforms ‘removing those barriers that have stopped businesses investing in Britain for too long’.
Yesterday, the boss of Lloyds Banking Group – Charlie Nunn – said: ‘The Chancellor has talked about having set the foundations and having got the foundations right. That was really important.
‘We didn’t have economic plans for the UK that was stable and in a good place. But what we will see over the next few months is the things they have talked about need to now be accelerated and they need to come at pace.’
Mr Nunn, who is also in Davos, told Bloomberg TV that a number of business leaders ‘have been concerned about what’s going on at the moment’.
The mood on the high street has been particularly grim as Ms Reeves’s NI hike falls particularly hard on major retailers.
Sainsbury’s said the ‘particularly challenging cost environment’ was behind its decision to cut thousands of jobs as it shuts down its remaining cafes and closes patisserie and pizza counters.
And Primark’s parent company Associated British Foods revealed a sales setback caused by the darkening mood among consumers since the Budget.
Finance director Eoin Tonge said: ‘There’s no doubt we are suffering from a weak consumer, particularly elements of our consumer base who are clearly struggling.’