British households are tightening their belts as unemployment climbs and hopes for the economy fade
UK consumer confidence has dropped for the first time in three months just as the jobs market shows fresh cracks.
The GfK Consumer Confidence Index slid to -19 in February, a three-point drop from January’s -16 and worse than the consensus forecast of around -15, according to data released Friday. It’s the first decline in three months and returns the gauge to levels last seen in November.
The reversal is being pinned squarely on rising job insecurity and stretched household budgets.
Personal finances sour, big-ticket spending stalls
The biggest drags came from how people feel about their own money. Perceptions of personal finances over the past 12 months fell to -7 from -3, while expectations for the year ahead dropped to +2 from +6 — both four-point declines.
The major-purchase index, which tracks willingness to splash out on cars, homes, or appliances, tumbled to -14 from -10.
“After a modest improvement in recent months, consumer confidence is down three points in February, returning to the level seen in November 2025. This decline is mainly driven by weaker perceptions of personal finances, both looking back a year and ahead,” said Neil Bellamy, Consumer Insights Director at GfK.
“This decline is mainly driven by weaker perceptions of personal finances – both looking back a year and ahead. Fewer people say that now is a good time to make major purchases, and fewer consumers intend to save money.”
“Although the rate of inflation is easing, prices continue to rise, forcing many households to prioritise day-to-day spending over longer-term needs,” he added. “Unemployment has now reached its highest level in nearly five years, and this is increasing concerns about job security, particularly given the backdrop of weak wage growth.”
Broader views on the economy stayed deeply negative: the general economic outlook for the next 12 months held steady at -31.
Unemployment at highest level since early 2021
The timing lines up with official data released last week by the Office for National Statistics. The UK unemployment rate climbed to 5.2% in the three months to December 2025, the highest since the quarter ending January 2021 and up from 5.1% previously.
Payrolled employees fell 134,000 on the year in January, youth unemployment (ages 18-24) jumped toward 14-16%, and wage growth (excluding bonuses) cooled to 4.2% – its slowest pace in years on a real, inflation-adjusted basis.
Economists point to higher employer National Insurance contributions, minimum-wage hikes, and companies rethinking entry-level roles amid AI advances as key culprits. The result is fewer opportunities for younger and lower-income workers, who are traditionally more optimistic.
Households are already tightening belts
With job fears rising, many Britons are actively cutting back. Surveys show growing numbers planning to slash discretionary spending, defer big purchases, and stick to strict budgets in 2026. One YouGov poll found 36% expect to be worse off this year versus just 22% who think they’ll be better off.
Retail sales did rebound strongly in January, up 1.8% month-on-month and 4.5% year-on-year at the fastest annual pace in nearly four years, but analysts caution that momentum could fade quickly if confidence keeps sliding.
Fitch Ratings warned earlier this month that UK consumer spending will likely stay weak throughout 2026 as job worries dominate.
