UK consumer confidence jumps on political shift but oil spike looms
British consumer confidence has seen its sharpest rise in nearly three years on the back of a political transition, but a sudden surge in oil prices threatens to derail the recovery and push inflation higher.
UK consumer confidence surged this month, with the long-running GfK index climbing six points to reach -17. This marks the highest level since January and the largest single-month increase since November 2023.
The data firm attributed the shift to what it termed a "Burnham bounce", following Andy Burnham’s byelection victory on 18 June that placed him in pole position to replace Keir Starmer as prime minister. Consumers’ outlook for the economy over the next year improved by eight points, while their assessment of the past year rose by 10 points. Neil Bellamy, consumer insights director at GfK, said July had delivered "a wave of optimism", adding: "The sense of a fresh start following the appointment of a new prime minister surely accounts for some of this bounce."
A strong run by the men’s England football team at the World Cup, sunny weather, and initial hopes that Middle East stability would lower fuel prices also contributed to the improved sentiment. "There were also hopes at the start of July that the Middle East conflict might stabilise and bring UK fuel prices down. The feelgood factor of the Fifa World Cup will have reinforced sentiment too," Bellamy said.
However, the underlying economic picture for Europe’s second-largest economy remains fragile. While all five indices in the survey improved, consumers’ outlook for their own personal finances rose by just two points, highlighting the continued pressure of the cost of living on household budgets. Bellamy noted that overall scores remain well below pre-Brexit levels from a decade ago, warning: "For the ‘Burnham bounce’ to be sustainable and boost consumer confidence, it will require consistent delivery by the refreshed UK government against deep cost of living challenges and persistent low economic growth."
Inflation risks return
Any recovery in UK consumer spending power could be swiftly curtailed by escalating geopolitical tensions. The recent reignition of conflict between the US and Iran has pushed Brent crude to $100 a barrel, directly threatening the fuel price relief that British consumers had hoped for earlier in the month.
Economic forecasters had already predicted that UK inflation, which fell to 2.6% in June from 2.8% in May, would climb to a peak near 4% in November. Those estimates predated the latest sharp rise in oil prices, meaning inflation could now spike even higher. For businesses and investors watching the UK market, the sudden return of energy-driven price pressures risks cancelling out any short-term retail boost generated by the recent political and sporting optimism.
