MediumIV Macro Policy & Sovereign Debt23 October 2026, Friday
UK consumer confidence suffers its steepest fall since the Brexit vote
GfK's index, published on 23 October, fell 11 points to −24, the largest monthly drop outside the pandemic since 2016. The same day, retail volumes were shown to have fallen 0.4% in September, yet the flash PMI rose to 53.1.
In GfK's survey of 2,003 people, conducted for NIQ between 1 and 14 October, the overall confidence index fell from −13 in September to −24. All five sub-indices declined. Expectations for the general economy over the next 12 months dropped 14 points to −36, and the major purchase index fell 14 points to −22. Business Matters says it is the biggest non-pandemic monthly fall since the 2016 EU referendum. GfK's Neil Bellamy called it an extraordinary collapse.
The Office for National Statistics (ONS) said retail sales volumes fell 0.4% month on month in September, against an expected 0.1% decline. August's gain was revised to 0.7%, and third-quarter volumes grew 0.7%. The fourth-warmest September on record held back demand for autumn clothing, while fuel volumes rose despite high prices. Retail Insight Network reports that total retail spending, online and in store, rose 0.3% on the month.
Survey and hard data point in different directions. Tradingpedia reports that the UK flash composite PMI rose from 52 to 53.1 in October, with manufacturing at 52.8 against a forecast of 51.8. The strong PMI supported expectations of a Bank of England (BoE) rate rise in November, and EUR/GBP fell to a 17-month low of 0.8360. Chancellor John Healey presents his first budget on 28 October; the confidence data landed five days before it.
Talay assessment
Bottom line
Households and companies are reading the same economy differently: confidence collapsed to −24 while the flash PMI climbed to 53.1. For the BoE, prices are what matter, and the strong PMI kept a November hike in play. Whether lost confidence turns into lost spending will become clear in retail and card data after the 28 October budget.
Likely effects
- BoEUncertainWeeks
The confidence slump has not weakened the case for a hike, because the PMI and jobs remain firm; November's decision will turn on energy-driven price pressure.
- RetailNegative1–6 months
The major purchase index falling to −22 points to durable spending being deferred until after the budget and Black Friday; margin pressure rises in clothing and homewares.
- SterlingPositiveWeeks
A stronger PMI than the euro area's and a more hawkish BoE outlook support sterling against the euro; EUR/GBP is at a 17-month low.
Possibilities, ranked
- 1BoE hikes before confidence recovers55%
The BoE raises rates in November, confidence stays below −20 and retail volumes flatline in the fourth quarter.
Watch: November BoE decision and the November GfK index
- 2Budget repairs confidence25%
The 28 October budget defuses tax fears, confidence partly recovers and spending holds up.
Watch: Post-budget November GfK index rising above −18
- 3Lost confidence hits spending20%
October retail data also fall and the BoE postpones its November hike.
Watch: ONS October retail sales on 20 November
Probabilities are calibrated judgement based on the sources, not measurement, and are revised as new information arrives. Not investment advice.
Market reaction
Indicators affected
- GfK consumer confidence▼ −24
- Retail volumes (m/m)▼ −0.4%
- Flash composite PMI▲ 53.1
- EUR/GBP▼ 0.8360
Sources
- NIQ — Consumer Confidence plunges 11 points to -24 in October
- Business Matters — Consumer confidence records biggest non-pandemic fall since 2016
- Retail Insight Network — UK retail sales fall 0.4% in September despite quarterly growth
- Tradingpedia — Sterling outperforms as PMIs push EUR/GBP to 17-month lows