Consumer confidence sees first setback in three years

After a sustained rise since the third quarter of 2022, consumer confidence has fallen for the first time in three years, according to Deloitte. The Big Four firm’s polling suggests that confidence fell by 2.6% in the second quarter of 2025 – with job security worries and debt concerns on the rise.

The economic picture in 2022 was fraught with concern about record levels of inflation, and the cost of living rising much faster than the average rate of pay. As a result, when inflation peaked at 11.1%, consumer confidence in the third quarter of the year fell to its lowest level since Deloitte began calculating it, a decade before.

With the rate of inflation slowing, and pay making some ground on it, consumer confidence enjoyed a moderate rebound over the following years. However, even as the UK expected to usher in a new period of political stability with the decisive election result of 2024, confidence never climbed into positive territory. Having lost more than £2,300 in annual household income on average, and inflation continuing to rise (because slow increases are still increases), UK consumers remained guarded on spending.

Now, however, Deloitte’s research has found that the turbulence of 2025 has put a fresh dent in spending confidence. The Deloitte Consumer Confidence Index fell by 2.6% to -10.4% in the second quarter of 2025, its lowest level since the start of 2024.

Based around averages of the net percentage improvement in confidence levels over the past three months for six individual measures, the drop in the overall confidence index was driven by a fall across all six fronts. However, the decline was more significant in sentiments around job security and debt. While the UK labour market remains robust, there are concerns corporates’ demand for labour is weakening, as employers fret over national insurance and minimum wages in April. Bosses also regularly state they will look to artificial intelligence as a means of undercutting wages – however well it can do that job.

As a result, consumer sentiment in job security has fallen by 4.8% to its lowest since early 2023, and is now below its long-term average for the first time in two years. At the same time, sentiment about levels of debt dropped by 3.7%, partly due to seasonality with the renewal of some annual utility plans in April often leading to an increase in the costs of household bills.

As the second quarter is a period when many consumers are booking summer holidays, or incur expenditure related to planning activities and entertainment for the summer, these segments could be hardest hit by the drop in sentiment. Consumers in the survey reported increased levels of discretionary spending driven by a significant rise in spending on clothing and footwear and more spending on holidays compared with both the previous quarter and the same period a year ago.

The researchers added, “Given the mixed outlook, ongoing geopolitical uncertainty and persistent inflation in food and utilities, our data shows consumers remain cautious about spending. Spending on essentials dropped this quarter a sign that consumers have been trying to reduce their everyday expenditure.”