UK Consumer Confidence rises in May but remains dangerously low

Emeritus Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm

The GfK Consumer Confidence Index continues to paint a worrying picture for the UK economy, despite rising from -25 to -23 in May. The figure remains low, indicating financial anxiety among households and that confidence in the economic outlook is struggling to recover, despite better-than-expected first-quarter GDP growth figures.

Consumer confidence is one of the strongest indicators of how secure people feel about their personal finances and future prospects. Today, many households remain deeply uneasy about the cost of living, job security, and the overall direction of the economy. This is not unfounded -inflationary pressures are set to return, unemployment has risen to 5%, and growth forecasts for the year remain low. Combined with concern around political instability, this situation will not be easy to reverse.

While the ramifications of conflict in the Middle East have significantly worsened the situation, the impact of domestic policy decisions should not be forgotten. Successive Budgets have hit businesses hard, increasing the burden on job-creating sections of society, while frozen income tax rates have squeezed the finances of many households. Mortgage costs remain significantly higher than many borrowers became accustomed to during the era of ultra-low interest rates. Rents continue to rise, and household bills remain elevated.

The unease is reflected in a persistently high household savings ratio. Hovering around 10%, this is the highest level (outside the pandemic) in the last decade.

The ’consumer is king’ in every economy. And consumer spending remains a key driver of UK economic activity. When confidence deteriorates, households tend to put off big purchases, cut discretionary spending, and become far more cautious with their finances. These decisions create negative knock-on effects for sectors such as retail, hospitality, leisure, and housing, all of which rely heavily on consumer demand.

Confidence is not merely an opinion poll – it has real economic consequences. Britain may still be avoiding an outright recession, but the latest figures suggest that for many households the recovery remains weak, fragile and yet to feed into their everyday life.

Among its UK locations, accountancy and advisory firm MHA has offices in Aberdeen and Edinburgh.