Andy Burnham’s Policy Push Sparks Short-Lived Consumer-Confidence Rise, Analysts Warn of Fragility

Data firm GfK reported that UK consumer confidence rose at its fastest monthly pace in almost three years during June, with a ten-point improvement in how respondents viewed the past year and an eight-point gain for the next twelve months. GfK attributed part of the uplift to a “fresh start” after the appointment of a new prime minister, Andy Burnham. Burnham’s recent measures include a temporary VAT cut for electricity bills from October, a £2 cap on bus fares across England, and a 20 % reduction in business rates for pubs, clubs and live-music venues.

The Guardian

Official figures show the average UK household spends £676.60 a week, with housing, fuel and power accounting for about one-fifth of total outlays; transport follows, while health and education together make up only 3 % of weekly spending. The richest fifth of households increased weekly spending by £98.10 (10 %) to £1,083.60, whereas the poorest fifth rose by £18.10 (5 %) to £407.30. Since the cost-of-living crisis began in late 2021, the consumer price level has risen by more than a quarter, with food and energy prices climbing especially sharply. The Bank of England has kept interest rates at elevated levels to curb inflation, adding pressure on borrowers, although many older Britons are mortgage-free and therefore more insulated.

The Guardian

The household saving ratio stands at 8.9 %, the highest level in a decade, after peaking at 27.5 % during pandemic lockdowns. Bank research indicates that the highest-earning 40 % of earners and retirees saved the most, while the poorest fifth experienced a decline in savings. The Centre for Cities think-tank found that households in affluent southern English neighbourhoods saved £12 for every £1 saved in poorer northern cities and towns.

The Guardian

The Bank of England predicts real incomes fell by about 0.5 % in the year to the end of June, and consumer-facing services output remains roughly 6 % below pre-pandemic levels. Analysts note that a volatile Middle-East conflict could further stoke inflation, extending the belt-tightening faced by consumers. The sustainability of the “Burnham bounce” therefore hinges on a continued rise in confidence, which will require focused support for the most financially strained households.

The Guardian

Because household consumption accounts for roughly 60 % of UK GDP, a weakening of consumer confidence could depress activity across high streets, services, construction and manufacturing. Without policies that specifically address the poorer fifth’s weaker outlook, the recent confidence lift may prove temporary, raising the risk of weaker demand and deflationary pressure.

The Guardian