UK consumer sentiment posts steepest drop in nearly 3 years: Deloitte

British consumer confidence took a sharp hit last quarter, marking its biggest fall since late 2022. This comes amid inflation concerns and job market anxiety continue to weigh heavily on households. That’s according to a new Deloitte survey, which warns of deepening worries over income, debt, and employment security.

As per the Deloitte survey, the UK's consumer confidence index dropped by 2.6 percentage points to 10.4% in the second quarter of 2025, the lowest level since Q1 2024. This is the first major fall in almost three years, excluding a minor 0.2-point dip last year, which the firm said was statistically insignificant. The last time confidence plunged at this scale was during the third quarter of 2022, when inflation peaked above 10 per cent and financial markets were rattled by then Prime Minister Liz Truss’ controversial mini-budget.

Job market jitters dominate household fears

Deloitte’s survey revealed that worries over job security and income growth were the main drivers of the decline in sentiment. “Concerns of a slowing labour market have left consumers worried… while persistent inflation and a high cost of living have negatively impacted sentiment towards personal debt,” said Celine Fenech, Deloitte’s consumer insight lead.

The findings come just days after official data showed the UK unemployment rate rose to 4.7% in the three months to May, its highest since 2021. At the same time, inflation accelerated to 3.6% in June, a six-month high.

Hiring slowdown adds to economic unease

Employers have been warning about rising employment costs. The higher national minimum wage, rolled out in April, along with increased employment taxes and planned legal changes making it harder to dismiss staff, have made businesses more reluctant to hire, according to industry groups.

While Deloitte’s data reflects rising household concern, it contrasts slightly with GfK’s sentiment survey, Britain’s longest-running, which showed consumer morale climbing to its highest since December.

Economic outlook still uncertain

Deloitte’s survey, based on responses from 3,200 consumers between June 13 and 16, measures six key factors: job security, job opportunities, income, debt, children’s welfare, and general health and wellbeing. Interestingly, a separate question on the state of the overall economy showed a 3.9-point improvement from the previous quarter, though sentiment is still 18.4 percentage points below where it stood a year ago.

“Activity in the UK has slowed in recent months,” said Deloitte chief economist Ian Stewart, “but an uptick in business confidence seen in the latest Deloitte CFO Survey testifies to continued resilience amid geopolitical uncertainties.”

The sharp drop in consumer sentiment adds to signs that Britain’s economy may be entering a more fragile phase, with households squeezed by inflation, businesses slowing hiring, and the job market showing cracks. Whether recent upticks in business confidence can reverse the mood remains to be seen.

(With inputs from the agencies)