UK Consumer Confidence Collapses Amid Iran War Inflation Fears
Consumer confidence in the United Kingdom has experienced a dramatic collapse following the onset of the Iran war, according to new research from the British Retail Consortium. The sharp escalation in energy prices, triggered by the effective closure of the Strait of Hormuz and attacks on regional infrastructure, has sparked widespread fears of higher inflation and weaker economic growth across oil-importing nations.
Survey Reveals Deep Economic Pessimism
A survey conducted by Opinium on behalf of the BRC between March 10 and 13 found that 64% of UK adults expect the economy to deteriorate over the next three months, with only 11% anticipating improvement. This resulted in a negative balance of -53%, a significant drop from the -20% recorded just a month earlier. Respondents also expressed increased pessimism about their personal finances, with the balance falling to -17 from -6 in February.
Helen Dickinson, chief executive of the BRC, stated, "Consumer confidence collapsed as the Middle East conflict raised the prospect of higher inflation in the months ahead. 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."
Inflation and Growth Forecasts Under Pressure
Official figures showed that the UK inflation rate held steady at 3% in February, prior to the war disrupting expectations. However, analysts have been hastily downgrading growth forecasts for 2026, concerned that rising energy prices—already evident at petrol pumps—will lead nervous shoppers to reduce spending on other goods and services.
The Bank of England had previously anticipated inflation returning to the government's 2% target this spring, potentially paving the way for interest rate cuts. Yet, last week's monetary policy committee meeting left rates unchanged and hinted that future adjustments might be upward.
Impact on Food and Fuel Prices
Slower food price inflation in February, driven by declines in items like olive oil, flour, and pizza, offered a temporary respite. Karen Betts, chief executive of the Food and Drink Federation, warned, "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 Office for National Statistics noted that the unchanged 3% inflation figure for February was influenced by higher clothing prices offsetting declines in other areas. Grant Fitzner, ONS chief economist, explained, "The largest upwards driver was the price of clothing, which rose this month but fell a year ago. This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices."
Since the war began, petrol prices have surged significantly, with the RAC reporting a 12p or 9% increase per litre of unleaded fuel by the end of last week.
Government and Business Responses
Chancellor Rachel Reeves announced on Tuesday that the Treasury is preparing contingency plans to potentially protect consumers from rising energy prices later in the year. She emphasized that any intervention would involve targeted support for needier households rather than broad handouts.
In response to the darkening global outlook, Shevaun Haviland, director general of the British Chambers of Commerce, will urge member companies on Thursday to continue seeking export opportunities. She is set to say, "The global economy is reeling from the Middle East conflict. Trade routes are severely disrupted; energy costs and wider prices are soaring. The impact of this war is profound. But 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."
