Consumer expectations for the economy have plunged to a ‘new low’ as the government faces continued pressure over public finances.
It comes as businesses report job cuts and reduced sales. Sainsbury’s said on Thursday it would cut 3,000 jobs while clothes chain Primark reported that its sales fell for the first time since the pandemic.
Expectations for the state of the economy over the next three months have worsened, according to the British Retail Consortium (BRC) Consumer Sentiment Monitor.
Those aged 18 to 27 remain the only group to expect the economy to improve, while two-thirds of those aged between 60 and 78 expect it to worsen, the poll found.
Confidence in personal finances also fell with older generations again remaining the most pessimistic.
Expectations of retail spending and wider spending both fell significantly, although the BRC said much of the drop is likely to reflect the end of the Christmas period as people “tightened their belts for the new year ahead”.
BRC chief executive Helen Dickinson said: “As the government warns of tough times ahead, it is little surprise that the public have caught the January blues.
“Consumer confidence in the economy fell to a new low, with concerns most pronounced among older generations.”
She added: “On top of this challenging market backdrop, retailers are facing £7bn in additional costs from the budget and new packaging levy.
“With retailers’ tight margins leaving little scope to absorb more costs, many are warning of price rises and job cuts in the coming months.
“To mitigate this, and shore up investment in shops and entry level jobs, the government must ensure that no shop ends up paying a higher business rate bill because of its proposed reforms.”
The survey follows volatility in the UK government bond market at the start of the year, which sent public sector borrowing costs soaring and led to fears that chancellor Rachel Reeves is on track to miss her fiscal targets.
She has previously ruled out both increasing borrowing and raising taxes following the significant tax rises in October’s budget, leaving her with few options beyond further spending cuts.
Associated British Foods, which owns Primark, said the clothing outlet’s sales fell 6 per cent in the last three months of the year.
Meanwhile, Sainsbury’s will cut 3,000 jobs in the UK as it seeks to cut costs at its headquarters while also closing 61 cafes and hot food counters.
It will cut one in five senior manager jobs, it said, as the company undergoes a three-year £1bn cost-cutting push.
Asked how the government would respond to suggestions that lay-offs at the supermarket were influenced by the Budget, Sir Keir Starmer’s official spokesperson said: “Growing the economy, backing businesses, putting more money in people’s pockets are obviously the priority. It is only by growing the economy we can fund our public services and raise living standards.”
Last week two-thirds of the nation’s top retailers warned they will have to raise prices to cope with rising tax bills triggered by Ms Reeves’s budget.
The BRC, whose members include Argos and Boots, said 67 per cent of the 52 finance bosses they surveyed said they would raise prices in response to increases in employers’ national insurance contributions from April.
