UK consumer confidence plunges to record low amid cost-of-living crisis

Xinhua
20 May 2022

The UK Consumer Price Index rose by 9.0 percent in the 12 months to April 2022, up from 7.0 percent in March. The country's central bank expected inflation to rise further over the remainder of the year to just over 9 percent in the second quarter (Q2) and averaging slightly over 10 percent at its peak in Q4.

LONDON, May 20 (Xinhua) -- Market research company GfK said on Friday that its Consumer Confidence Index for Britain in May dropped to its lowest level since records began in 1974 amid the country's raging cost-of-living crisis.

CONFIDENCE WEAKER THAN DARKEST DAYS

May's result, down two points from April to minus 40, is one point below the previous record set in July 2008, when the headline score plunged to minus 39, said Joe Staton, client strategy director at the GfK.

"This means consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the COVID shutdown," he added.

According to Staton, "this comes as UK unemployment hits a 50-year low with vacancies outnumbering job seekers for the first time, and inflation peaking at a 40-year high driven by soaring food and fuel bills.

"The outlook for consumer confidence is gloomy, and nothing on the economic horizon shows a reason for optimism any time soon," Staton added.

"The jump in UK inflation in April is eye-watering and underscores the growing cost-of-living crisis facing households and the damaging squeeze on firms' ability to invest and operate at full capacity," said Suren Thiru, head of economics at the British Chambers of Commerce (BCC).

HOUSEHOLDS SUFFERING

With surging prices, households in the UK have felt the squeeze.

In April, the Scottish Widows Household Finance Index showed that household savings in the UK declined at the steepest pace for nine years in the first quarter of this year amid the quickest reduction in cash availability since the final quarter of 2013.

Amid the crisis, the poorest have borne the brunt. While everyone is affected by the tightest squeeze on household incomes in half a century, low-income households are facing the toughest time, said the Resolution Foundation, a think tank.

British charity Citizens Advice noted on Wednesday that by mid-May, it had helped more than 750 people each day with referrals to food banks, and in the first third of the year, it saw more cases of people unable to top up their prepayment meter than in the whole of 2021 combined.

"The warning lights could not be flashing brighter," said Dame Clare Moriarty, chief executive of Citizens Advice.

"People washing in their kitchen sinks because they can't afford a hot shower; parents skipping meals to feed their kids; disabled people who can't afford to use vital equipment because of soaring energy bills," Moriarty said.

Young people have also been struggling.

A report by the professional services network Deloitte showed on Wednesday that half of the UK's Gen Zs (generation born between 1997 and 2012) and millennials use all their monthly income on living costs, whilst two in five have taken on a side hustle to make ends meet.

"For the first time in the history of Deloitte's Gen Z and Millennial Survey, now in its eleventh year, cost of living has emerged as the top concern," Will Gosling, partner and human capital lead at Deloitte, said.

GOVERNMENTAL ASSISTANCE

To lessen the costs for millions of households, Chancellor of the Exchequer Rishi Sunak announced in March that the government will raise the income threshold for people to start paying National Insurance by about 3,000 British pounds (3,740 U.S. dollars) to 12,570 pounds in July.

It is a 6-billion-pound tax cut for 30 million people across the country, and a tax cut for employees worth over 330 pounds a year, according to Sunak.

Also, this year all domestic electricity customers will receive an upfront discount on their bills worth 200 pounds. Energy suppliers will apply the discount on people's bills from October, Sunak said in February.

In April, the government also introduced a 150-pound council tax rebate to help with the cost of energy. This will benefit around 80 percent of all homes in the country, Sunak noted then.

Nevertheless, Sunak said on Wednesday at the Confederation of British Industry's Annual Dinner that he "cannot pretend this will be easy" to help cut costs for families.

"The next few months will be tough," he added.

POSTCODE LOTTERY

Problems with the governmental assistance have already emerged. British charity National Energy Action pointed out on Tuesday that the country's poorest households are struggling to get the 150-pound council tax energy rebate.

While those who pay by direct debit should receive the money automatically, those who pay in other ways or who are exempt from council tax have to apply.

These are often the most vulnerable households, many of whom do not know they are eligible or how to apply, meaning millions of pounds are remaining unclaimed, the charity said.

"The UK government's response to the energy crisis has been wholly inadequate so far," said Adam Scorer, chief executive of the charity.

"Councils across England and Wales have their own way of administering the scheme, creating a postcode lottery for struggling households," Scorer said. (1 British pound = 1.25 U.S. dollar)