UK Consumer Confidence Hits Three-Year Low Amid Iran War Fears and Inflation Pressures

British households are facing a perfect storm of external shocks and domestic economic strains, pushing consumer confidence to its lowest level since early 2022. The latest surveys from GfK, YouGov, and the Confederation of British Industry (CBI) reveal a sharp decline in sentiment, with the GfK Consumer Confidence Index falling to -27 in April 2025—a three-year low not seen since the depths of the post‑pandemic slump in March 2022.

This downturn is driven by two primary forces: renewed anxiety over the escalating conflict in Iran and persistent inflation that continues to erode purchasing power despite multiple interest‑rate hikes by the Bank of England. The situation has been exacerbated by weaker‑than‑expected retail sales, a softening housing market, and growing concerns about job security in sectors exposed to global supply‑chain disruptions.

For investors, retailers, and policymakers, understanding the drivers behind this confidence slump is critical for anticipating spending patterns, adjusting inventory levels, and shaping fiscal responses. This article breaks down the latest data, explains the underlying causes, and outlines what the outlook might hold for the remainder of 2025.

What the Latest Surveys Show

The most recent data points come from three major, regularly published surveys that track household sentiment in the United Kingdom:

• GfK Consumer Confidence Index: The headline index dropped to -27 in April 2025, down from -20 in March and the lowest reading since March 2022 (-30). The index combines five sub‑indices: personal finances over the next 12 months, general economic situation over the next 12 months, personal finances over the last 12 months, major purchase intentions, and savings attitudes.
• YouGov Consumer Mood Tracker: In April 2025, 42% of respondents said they felt “worse off” compared with a year ago, up from 35% in January. The proportion expecting their financial situation to worsen over the next six months rose to 48%, from 40% three months earlier.
• CBI Distributive Trades Survey: Retailers reported a net balance of -15 for expected sales over the next three months in April 2025, the weakest reading since the survey began in 2016. The net balance for actual sales in March 2025 was -8, indicating that shops are already seeing weaker demand.

These surveys are widely regarded as the gold standard for gauging household sentiment in the UK. They are conducted monthly, use large, nationally representative samples, and are published by independent research firms with transparent methodologies.

Primary Drivers of the Confidence Slump

1. Escalating Geopolitical Tensions: The Iran Conflict

The renewed escalation of hostilities involving Iran began in early March 2025, when Iran‑backed militia groups launched a series of drone and missile attacks on Israeli and U.S. Assets in the region. In response, the United States and its allies, including the United Kingdom, conducted targeted airstrikes on Iranian military facilities. The conflict intensified through April, with reports of further Iranian retaliation and heightened rhetoric from Tehran.

For UK consumers, the immediate concern is the potential for the conflict to disrupt global energy supplies. Iran is a significant oil producer, and any disruption to its exports—or to shipping lanes in the Strait of Hormuz—could push Brent crude prices higher. As of 30 April 2025, Brent crude was trading at approximately $92 per barrel, up from $85 at the start of the year. Higher energy prices feed directly into household bills for heating, transportation, and electricity, squeezing disposable income.

Beyond the economic channel, the conflict has heightened general anxiety about international stability. A YouGov poll conducted on 15 April 2025 found that 58% of UK adults said they were “very or fairly worried” about the situation in the Middle East, up from 49% in January. This geopolitical unease feeds into the broader “general economic situation” component of confidence indices.

2. Persistent Inflation and Cost‑of‑Living Pressures

Despite the Bank of England’s aggressive tightening cycle—raising the base rate from 0.1% in December 2021 to 5.25% in August 2023 and holding it there through 2024— inflation has remained stubbornly above the 2% target. The Consumer Prices Index (CPI) stood at 3.8% in March 2025, down from a peak of 11.1% in October 2022 but still well above target. Core inflation (excluding energy, food, alcohol and tobacco) was 3.5% in the same month.

Energy prices, while off their 2022 peaks, remain a significant burden. The Office for National Statistics (ONS) reported that the average household energy bill was £1,850 per year in March 2025, compared with £1,200 in March 2021. Food prices have also remained elevated; the ONS Food and Non‑Alcoholic Beverages index was 4.2% higher in March 2025 than a year earlier.

These persistent price pressures have led to a widespread feeling that household budgets are being squeezed. The YouGov tracker showed that 61% of respondents in April 2025 said they were “very or fairly concerned” about their ability to afford essentials, up from 54% in January.

3. Domestic Economic Weakness: Retail, Housing, and Jobs

The confidence slump is not solely the result of external shocks; domestic economic indicators have also deteriorated.

• Retail sales: The ONS reported that retail sales volumes fell 0.5% in March 2025 compared with February, marking the third consecutive monthly decline. Year‑on‑year, volumes were down 1.2%. The British Retail Consortium (BRC) noted that non‑food retail was particularly weak, with sales down 2.0% year‑on‑year in March.
• Housing market: Halifax reported that the average UK house price fell 0.3% in April 2025, the first monthly decline since January 2023. Mortgage approvals for home purchases dropped 8% year‑on‑year in Q1 2025, reflecting higher borrowing costs and buyer caution.
• Labour market: While the unemployment rate remained low at 4.2% in March 2025, the ONS reported a rise in the number of people working part‑time because they could not find full‑time operate, increasing from 1.1 million in Q4 2024 to 1.3 million in Q1 2025. Wage growth, while still positive, has slowed; average weekly earnings grew 4.0% year‑on‑year in March 2025, down from 5.5% in March 2024.

These domestic factors reinforce the perception that the economy is losing momentum, even as the labour market remains relatively tight. For consumers, the combination of higher costs, weaker asset values (housing), and concerns about job security creates a cautious outlook.

Implications for Different Sectors

Retail and Consumer Goods

Retailers are already feeling the pinch. The CBI Distributive Trades Survey’s negative net balance for expected sales suggests that shops are anticipating weaker demand in the coming months. This is particularly concerning for discretionary spending categories such as clothing, electronics, and home furnishings. Travel Weekly reported in April 2025 that holiday bookings were down 7% year‑on‑year, with consumers opting for shorter, cheaper breaks or staycations.

To cope, many retailers are