Consumer confidence in the United Kingdom has experienced a sharp and significant decline since the escalation of tensions in the Middle East, according to modern research from the British Retail Consortium (BRC). The drop in optimism is largely attributed to rising energy prices, fueled by concerns over disruptions to vital shipping lanes and attacks on infrastructure in the region, raising fears of renewed inflationary pressures and slower economic growth. This shift in sentiment comes at a delicate moment for the UK economy, which had begun to show signs of stabilization after a prolonged period of high inflation.
The BRC’s latest data, gathered through a survey conducted by Opinium between March 10th and 13th, reveals a dramatic shift in public perception. A substantial 64% of UK adults now anticipate the national economy will worsen over the next three months, a stark contrast to the 11% who foresee improvement. This results in a balance of -53%, a considerable drop from the -20% recorded just a month prior. Personal financial outlooks have as well soured, with a negative balance of -17, down from -6 in February, indicating growing anxieties among households about their own economic well-being. The situation highlights the fragility of economic sentiment and the speed with which geopolitical events can impact consumer behavior.
Rising Energy Costs Drive Pessimism
The primary driver of this decline in confidence appears to be the escalating cost of energy. The conflict in the Middle East has raised concerns about potential disruptions to the flow of oil through the Strait of Hormuz, a critical waterway for global energy supplies. Attacks on infrastructure in the region have further exacerbated these anxieties, leading to a surge in oil prices. According to the RAC, a litre of unleaded petrol in the UK has already increased by 12p, or 9%, since the beginning of the conflict. The RAC has warned of further increases in the coming weeks.
Helen Dickinson, Chief Executive of the BRC, emphasized the impact of these developments, stating, “Consumer confidence collapsed as the Middle East conflict raised the prospect of higher inflation in the months ahead.” She added, “Just as the economy was beginning to turn a corner on inflation, the rise in global energy prices is particularly unwelcome for businesses and families.” The timing is particularly concerning, as businesses and consumers alike were beginning to adjust to a period of relative price stability.
Economic Forecasts Revised Downward
The impact of higher energy prices is already being felt in the financial markets, with analysts revising their UK growth forecasts for 2026 downward. The expectation is that increased energy costs will prompt consumers to curtail discretionary spending, dampening economic activity. This comes after a period where the Bank of England had anticipated inflation would return to its 2% target in the spring, potentially paving the way for interest rate cuts. Though, the Monetary Policy Committee’s recent meeting resulted in interest rates being held steady, with indications that a rate increase could be on the horizon.
While February’s inflation rate remained stable at 3%, according to the Office for National Statistics (ONS), this figure was collected before the full impact of the Middle East conflict was reflected in energy prices. Grant Fitzner, the ONS chief economist, noted that while clothing prices rose, declines in petrol costs partially offset this increase, but that data predates the recent surge in oil prices. The full ONS report for February is available online.
Food Price Inflation: A Looming Threat
The food sector is also bracing for potential price increases. Slower food price inflation in February, driven by drops in the cost of items like olive oil, flour, and pizza, is seen as a temporary reprieve. The Food and Drink Federation (FDF) has warned that this is likely “the calm before the storm.” Karen Betts, Chief Executive of the FDF, explained, “The longer the conflict in the Middle East goes on, the bigger its impact will be on food prices. With food and drink price inflation already running above historical averages, heightened energy, maritime fuel and fertiliser costs will put further pressure on prices.”
The interconnectedness of global supply chains means that disruptions in one region can quickly ripple through the entire system. Higher energy costs translate into increased transportation expenses, while disruptions to shipping routes can lead to shortages and further price hikes. This creates a challenging environment for both businesses and consumers.
Government Response and Business Strategies
The UK Treasury is reportedly preparing contingency plans to address the potential impact of rising energy prices on consumers. Shadow Chancellor Rachel Reeves stated on Tuesday that any government intervention would likely be targeted towards those most in need, rather than a universal support package. Reeves outlined this approach in a recent statement.
Meanwhile, the British Chambers of Commerce (BCC) is urging businesses to proactively seek export opportunities despite the deteriorating global outlook. Shevaun Haviland, Director General of the BCC, is expected to emphasize the importance of international trade in a speech on Thursday, arguing that “in a more uncertain world the answer is not to retreat. It is to reach out, build more connections, open more doors and trade more, not less.”
The current situation underscores the vulnerability of the UK economy to external shocks. While the immediate impact of the Middle East conflict is still unfolding, the decline in consumer confidence serves as a warning sign. The next key indicator to watch will be the March inflation figures, due to be released in April, which will provide a clearer picture of the extent to which rising energy prices are feeding into broader inflationary pressures.
This is a developing story, and we will continue to provide updates as they become available. We encourage readers to share their thoughts and experiences in the comments below.
