UK consumer confidence suffered its largest quarterly decline in nearly three years in the second quarter of 2025, according to Deloitte’s latest Consumer Confidence Index. The index slipped by 2.6 points to –10.4, the lowest reading since early 2024 and a clear signal of rising household anxiety amid a cooling labour market and persistent inflation.
The survey, conducted by YouGov among 3,200 UK adults from 13–16 June, showed that all six of Deloitte’s sub-indices fell quarter-on-quarter. The steepest drop was recorded in job-security sentiment, down by 4.8 points. Other notable declines included perceptions of job opportunities (–3.9 points), debt concerns (–3.7 points), and disposable income (–2.2 points). Confidence in children’s welfare and overall health and wellbeing also weakened. Despite a marginal improvement in consumers’ outlook for the state of the economy — up by 3.9 points — it remains substantially negative compared to a year ago.
Consumers signalled a clear shift in spending priorities. Essential outlays dropped by 4.6 points, partly due to lower utility bills, while discretionary spending edged up by 1.5 points, driven mainly by increases in clothing, holiday bookings, and eating out. Leisure spending showed particular resilience, suggesting that consumers continue to prioritise experiences even as budgets tighten.
The backdrop is a challenging one for households. UK inflation accelerated to 3.6% year-on-year in June — the highest since January 2024. Unemployment reached 4.7% for the March to May period, the widest reading since 2021, while regular pay growth has started to slow. Retail sales volumes in May fell by 2.7% month-on-month, marking the worst monthly performance since December 2023. Policy changes have added further pressure: the National Living Wage was lifted by 6.7% to £12.21 in April, raising costs for employers and contributing to cautious hiring.
Céline Fenech, consumer insight lead at Deloitte, commented: “Concerns of a slowing labour market have left consumers worried about job security and income growth prospects.” Deloitte’s chief economist, Ian Stewart, added: “Higher inflation… coupled with a weaker jobs market is weighing on consumer sentiment.” Victoria Scholar, head of investment at Interactive Investor, noted: “Although inflation came in hotter-than-expected, the Bank of England is expected to focus instead on the deteriorating growth outlook.”
Despite the downbeat consumer sentiment, some conflicting signals persist. The GfK barometer, another closely watched confidence measure, rose to –18 in June, its strongest print of the year. Meanwhile, Deloitte’s own CFO Survey shows risk appetite among UK finance chiefs at a two-year high. The divergence suggests that business leaders remain relatively optimistic about investment prospects, even as households feel the squeeze.
Looking to financial markets, investors are pricing a 77% chance of a 25-basis-point Bank of England rate cut on 1 August, despite persistent inflation. If consumer spending falters, retail and discretionary stocks such as NEXT and JD Sports may lag the wider FTSE All-Share. Conversely, travel and leisure sectors continue to benefit from robust holiday demand, while lenders such as Barclaycard and NewDay face a rising risk of consumer arrears.
The next key data point will come from the July GfK consumer confidence barometer, due on 26 July, followed by the Bank of England’s monetary policy decision on 1 August and Q3 wage negotiations. These will offer fresh signals on whether UK consumers’ gloom is likely to persist into the second half of the year.
