‘Job security jitters may rise — and constrain consumer spend’

If the UK had a competent government in the fullest sense of the term—that is, to include officials as well as elected representatives—the performance of the consumer economy would be very different — in fact, much better.

The domestic political class has thrown up material challenges for the shopper since before the Scottish Referendum in 2014, the nadir being lettuce-defeated Liz Truss, augmented by a series of powerful externalities that have changed the course of history—the pandemic, Russia’s malevolence, and now the volatile world of Trump II.

That said, given more than a decade of domestic political turmoil that has also embraced Cameron’s failed gamble on the Brexit Referendum through to the collapse in the capability of the Tories, albeit not so low that Michael Gove of Oxford Street fame could not be awarded a peerage.

And, on to the ‘Rachel from accounts’ circus of an October 2024 Budget, it is not unreasonable to suggest an award for British shoppers for being so stoic.

Their stoicism has been supported by the blessing of the UK economy this century, that is, a firm labour market manifested in a sustained period of relatively high vacancies, low unemployment by historic and relative to EU levels, and elevated levels of in-migration. The latter reflects the inadequate skill base and increasing aversion by many ‘Britons’ to want and seek work, aided by a somewhat benevolent benefit system.

That aforementioned autumn 2024 Budget, alongside the possible dampening outcomes for domestic recruitment from the forthcoming Employment Bill, the growing encroachment of labour-replacing technology, especially the potential of artificial intelligence, never mind the fall-out of Trump’s economic policies, makes us more nervous about the prospects for the UK jobs market, a critical underpinning of domestic consumer confidence.

Indeed, the car crash of the run-up to Reeves’ now infamous Budget, the event itself, and then the crazy construct of the chancellor setting somewhat arbitrary fiscal contingency rules that are dependent upon the very mediocre, are far from credible.

In fact, the Office for Budget Responsibility (OBR) has resulted in a very much Whitehall-created farce but also elevated discourse in Britain about the need for budgetary cuts and tax increases to keep the gilt market wolves from the door.

“UK working households are approaching the 22nd month of rising real living standards, appreciation at near 3% clip in spring 2025”

Farce is an understatement as Reeves’ spring statement, which brought with it a modicum of predicted welfare budget cuts as well as a laughable pledge to build T6 at Heathrow, was one week before ‘Liberation Day’ in Washington, which has led every economist on the planet bar the OBR to further downgrade forecasts for 2025 and 2026 UK GDP growth.

This all means that the shelf life of Reeves’ March update had expired within a week, with further noise around cuts and tax rises, which appear ever more likely in November 2025. Maybe farce’ is too timid a term…

Meanwhile, mere mortals, working people and the like, are nervous, just as is the case for their employers, as to how matters are to pan out with visibility remaining very weak against a chaotic, and, frankly, far from acceptable US policy backdrop.

What this may mean, though, is that worries about job security, which we saw building in Q4 2024, and hence the ongoing weak demand for higher-ticket discretionary goods, may build, as may unemployment and, due to the UK Government’s wider policies, inflation. Indeed, such an unholy trinity is the core expectation of no other than the UK retail sage, Lord Wolfson.

It’s true that the starting point of the UK labour market could be a lot worse. Additionally, while somewhat concentrated in its distribution, the UK savings ratio is high at about 11% to 12%, wider household budgets have also been in worse shape, while a shortage of stock at least supports housing market values.

Lastly, for now, UK working households are approaching the 22nd month of rising real living standards, with appreciation at a near 3% clip in spring 2025.

Unlike his chancellor, Starmer is having a good 2025 so far, which, if it leads to sound outcomes on war in Europe and trade with the US and the wider world, maybe the currently worrying mood music and underlying narrative will adjust. Maybe, but for now, the discretionary consumer outlook in the UK looks constrained, for which retailers need to remain alive and agile — easier said than done, I know.