British optimism about economy hits record lows
British shoppers’ confidence in the economy has plummeted to unprecedented lows amid escalating conflict in the Middle East, which has reignited fears of rising inflation and higher energy costs, according to new data from the British Retail Consortium (BRC).
The BRC-Opinium survey, conducted between 10-13 March found that consumer expectations for the state of the UK economy over the next three months sank to a record low of -53 in March, a sharp decline from -30 in February. Expectations for personal financial situations also hit a new low, falling to -17 from -6 the previous month.
The drop comes as global tensions, particularly the conflict involving Iran, have driven up oil and gas prices, threatening to reverse recent progress in taming UK inflation, which stood at 3% in February.
Stock market volatility has added to the gloom, with the decline in confidence most pronounced among Baby Boomers, who rely heavily on investments and pension funds.
“Consumer confidence collapsed as the Middle East conflict raised the prospect of higher inflation in the months ahead,” said Helen Dickinson, chief executive of the BRC. “As stock markets tumbled, confidence in both the economy and personal finances dropped to their lowest levels on record.”
Dickinson noted that spending expectations actually edged higher, with personal retail spending expectations rising to +2 from 0, and overall personal spending to +13 from +6. However, saving expectations fell to -8 from 0, suggesting households anticipate tighter budgets as energy costs ripple through the economy.
“The current conflict has created a great deal of uncertainty in the economy. Inflation is expected to rise in the coming months,” Dickinson added. “Just as the economy was beginning to turn a corner on inflation, the rise in global energy prices is particularly unwelcome for businesses and families.”
It is vitally important that government policy avoids exacerbating the situation, she said, urging ministers to prioritise bringing down the cost of living and minimise unnecessary costs on retailers, such as new employment laws and rising packaging taxes.
The findings mark a dramatic reversal from earlier in the year, when consumer sentiment had shown modest improvements. In February, economic expectations had edged up slightly, offering a glimmer of hope after a prolonged period of squeezed household budgets.
Economists and analysts have echoed the concerns. The surge in energy prices following disruptions linked to the Middle East conflict, including impacts on global oil supplies, has prompted most forecasters to revise upward their inflation projections for later in 2026. Public inflation expectations have also jumped sharply in recent surveys.
Retailers face a challenging environment as they brace for potential pass-through of higher wholesale costs to consumers, even as many households remain cautious after years of elevated living costs.
