Consumer confidence is today reported to have fallen to a new record low as people facing painful budget squeezes have become "exasperated" at the state of the economy.

A closely-watched monthly survey of sentiment reversed a rebound in July to fall to its lowest level since records began in 1974.

The index, compiled by GfK, has dropped three points this month as consumers battle runaway inflation, a growing tax burden and fail to secure wage increases in line with rising prices.

Joe Staton, client strategy director at GfK, told the Times: "These findings point to a sense of capitulation and financial events moving far beyond the control of ordinary people.

"With headline after headline revealing record inflation eroding household buying power, the strain on the personal finances of many is alarming. Just making ends meet has become a nightmare and the crisis of confidence will only worsen with the darkening days of autumn and the colder months of winter."

The UK economy registered a 0.1% GDP contraction in the three months to June and will have officially fallen into recession if growth turns negative in the third quarter.

Household confidence surveys are a gauge of the future health of the economy, asking respondents about their spending expectations for the months ahead.

Sub-indices fall

The Times says all five of GfK's sub-indices have fallen in August, including measures on future purchases, as well as a consumer's personal-financial situation in the past 12 months and the coming 12 months.

The August figures have wiped out a slight rebound in the survey measured in July.

Mr Staton said: "A sense of exasperation about the UK's economy is the biggest driver of these findings."

Household energy bills will triple in October compared with April, exceeding £3,600 a year - and could climb to £5,000 next year.

Linda Ellett, UK head of consumer markets at KPMG, told the Times that households and retailers were braced for "what is looming on the horizon".

She added: "So far this year retail sales have somewhat defied the very low levels of consumer confidence. But a widespread reduction in spending ability will lead to drops in demand and changing buying behaviour, both of which will impact the high street and wider economy.

"The scale of the demand reduction remains unknown, but retailers know there will be various trade-down audiences and treat occasions. The key to weathering this storm is to try and capture and retain those customers, from those seeking out more value products through to those swapping meals-out for premium-range meals."

Call to limit energy prices rises

Also today, the NHS says rising numbers of people will fall sick and see their health worsen unless the UK Government takes further action to limit energy price rises.

The NHS Confederation said the UK is facing a "humanitarian crisis".

The group, which represents health bosses, said many people would face the awful choice between skipping meals to heat their homes or having to live in cold and damp conditions.

But the BBC reports that ministers maintain action was being taken and the NHS supported. This includes £400 payments to every household this autumn to help pay energy bills.

FTSE 100

The UK's top share index, the FTSE 100, was down 13 points at 7,529 shortly after opening this morning, following yesterday's 26-point gain.

Brent crude futures were down 0.41% at $96.19 a barrel.

Companies reporting today

  • Half-year results: Apax Global Alpha

More like this…

View all