UK Consumer Confidence Hits Lowest Level Since October 2023 as Iran War Bites
UK consumer confidence has fallen to its lowest level in more than two years, dropping four points to -25 in April 2026 as the economic fallout from the Iran-Israel conflict — including soaring energy prices and rising inflation — sours household sentiment.
The GfK consumer confidence index, published on 23 April, showed the third consecutive monthly decline, with households growing increasingly pessimistic about both their personal finances and the wider economic outlook.
Background
Consumer confidence is a key indicator of economic health, reflecting households' willingness to spend and invest. The index had been gradually recovering from the lows of the cost-of-living crisis, but the escalation of the Middle East conflict has reversed that progress, with energy prices surging as the Strait of Hormuz disruption restricts global oil supplies.
Key Developments
The April reading of -25 is the lowest since October 2023, when the UK was in the grip of the post-pandemic inflation surge. The decline was attributed directly to the disruption and high energy prices resulting from the Iran war, which has pushed Brent crude above $103 per barrel. Thomas Pugh, chief economist at RSM UK, commented that recent economic data was unlikely to be sufficient to sway the Bank of England's Monetary Policy Committee at its upcoming meeting, given the overriding geopolitical risks.
The British Chambers of Commerce warned that sustained increases in energy costs would dramatically worsen the inflation outlook, creating the potential for a stagflationary scenario — where high inflation is coupled with stagnant economic growth. The BCC forecast inflation would average 2.7% by the final quarter of 2026 and saw no prospect of interest rate cuts in the near term.
An analysis from AJ Bell highlighted the significant valuation gap between UK and US stock markets, with the FTSE 100 trading at 13.1 times forecast earnings — a 37% discount to the S&P 500's 20.8 times forward earnings, wider than the 10-year average discount of 33%.
Why It Matters
Falling consumer confidence typically leads to reduced spending, which can slow economic growth and put pressure on retailers and service businesses. With the UK economy already navigating a challenging environment, a prolonged period of low confidence could tip the country into recession.
What's Next
The government is under pressure to announce additional support measures for households. The Bank of England's 30 April rate decision will be closely watched, with markets pricing in a hold at 3.75%. More at the Financial Times.
