Budget 2025 Uncertainty Hits Consumer Confidence

Income Tax Fears Weigh on Public Sentiment as Job Market Shows Signs of Fragile Recovery

Consumer confidence in the UK has sharply declined as speculation over Budget 2025 intensifies, raising concerns about spending during the crucial festive season. While hopes for economic stability linger, mixed signals from the government and Chancellor Rachel Reeves have left many unsure about their financial future.

Public Spending Outlook Worsens

Figures from the British Retail Consortium (BRC) and Opinium highlight a steep drop in consumer expectations, with economic confidence for the next three months falling to -44, down from -35 in October.

Key reasons include:

• Widespread rumours of income tax increases.
• Ongoing uncertainty about fiscal policy.
• Concerns over potential “stealth taxes” from frozen income tax thresholds.

Although a proposed income tax hike was officially cancelled last week, Labour leader Sir Keir Starmer has not ruled out freezing thresholds. Critics argue that this would still raise tax burdens as wage growth pushes more people into higher brackets.

Helen Dickinson, CEO of the BRC, stated:

“Months of speculation have intensified public concerns over their own finances. Immediate action is needed to reduce the spiralling cost burdens retailers face to help stabilise prices.”

Fragile Signs of Labour Market Recovery

Despite the gloom surrounding consumer sentiment, early signs of improvement in the job market offer a glimmer of hope.

According to the Recruitment and Employment Confederation:

• Job postings rose by 2.1% in October, totalling 754,359 new adverts.
• The UK now has over 1.6 million live job listings.
• Notable growth in vacancies for medical radiographers, delivery drivers, couriers, and further education professionals.

However, the report cautioned that the recovery remains fragile. Last year’s rise in employers' National Insurance contributions, introduced by Reeves, had previously dampened hiring and contributed to an uptick in unemployment.

Positive Momentum: DLR Extension Backed

Amid the budget noise, some infrastructure-related developments have been met with optimism.

Mayor of London, Sadiq Khan, welcomed news that the Chancellor is likely to approve a £1.7 billion investment to extend the Docklands Light Railway (DLR) to Thamesmead — a historically under-served area.

Project details:

• Extension from Gallions Reach to Thamesmead via Beckton.
• Aims to unlock up to 25,000 new homes and 10,000 new jobs.
• Could attract nearly £18 billion in private investment.

Sir Sadiq Khan commented:

“This extension will revolutionise travel in south-east London, stimulate job growth, and support national economic development.”

Investor and Retail Sector Reactions

Retailers are bracing for a more cautious consumer as Christmas approaches. Speculation around income taxes, inflation pressures, and broader economic uncertainty could dampen spending — traditionally a vital period for the retail and hospitality sectors.

Additionally:

• A less confident consumer could lead to softer retail earnings.
• Retail stock prices may face downward pressure if weak sales are reported in the final quarter.
• Any delays or perceived austerity in the budget could further unsettle markets.

Final Thoughts

As Budget 2025 approaches, all eyes are on Chancellor Reeves. Investors, business leaders, and households are calling for clarity and pro-growth measures to restore confidence. With signs of a tentative jobs market recovery, bold moves on infrastructure and fiscal policy could determine whether the UK economy can maintain momentum through 2025.

Expectations are high — but so are the risks.

Sources: SKY.com, BBC.co.uk)