‘Will UK consumer confidence follow in the same direction as the US?’

One of the perks of my global deals role is that I’m able to visit other countries. Recently, I’ve had the chance to visit colleagues and clients in the US more frequently, which has been lovely – even if I’ve been inundated with requests to bring over tea and biscuits.

Despite the current global economic turbulence, that special relationship between the US and the UK remains. But even with enduring ties between our nations, it appears there’s some disconnect when it comes to consumer confidence.

At the start of 2025, there was plenty for UK retailers to be optimistic about. Consumer confidence was better than average, disposable income was improving, we saw early signs of growth in big-ticket orders, and the year’s performance would be against a relatively subdued 2024 result.

Fast forward a few months, and the picture is less rosy. Inflation concerns, declining consumer sentiment and slowing spending have all crept into the UK market landscape. Our own Consumer Sentiment Tracker shows a fall, following on from the ‘vibecession’ we saw earlier in the year. People are now starting to cut back on spending and all confidence indicators are down compared with the previous quarter.

While things look a little gloomy, it’s worth noting that sentiment remains around the long-run average

Consumers tell us that their household finances are worse than last year and there is greater concern over both personal and national economic situations. Since the beginning of 2025, worries over the economy, geopolitics and inflation have increased, even before recent events concerning US trade tariffs.

Elsewhere, there are concerns about job security affecting people, particularly the young and lower skilled workers – those whose employers were most impacted by April’s National Insurance threshold and National Living Wage changes. We’re also waiting for rises to council tax, phone and utilities bills to filter through to consumers.

However, while things look a little gloomy, it’s worth noting that sentiment remains around the long-run average. And while things may be falling, they’re doing so from a high starting point. Retail sales grew again in March according to the ONS, meaning that the first quarter of 2025 had the highest three-month run of sales growth since July 2021.

A good predictor of the UK’s future is often the situation stateside. Across the Atlantic, recent events have begun to feed through to US consumers. The University of Michigan consumer confidence reading for April showed confidence at the second-lowest level since the series started in 1978.

This data begs the question of whether the UK follow suit and face an economic downturn similar to the US?

US consumers are braced for a surge in inflation, with expectations for unemployment having risen to the highest level since the financial crisis in 2009. We know that households tend to react to uncertainty by building up savings and delaying consumption, particularly on big-ticket items such as cars and home refurbishment. Businesses react in a similar way.

I’m in Chicago this month, and it’ll be interesting to see whether I’ll notice that change in sentiment. This data begs the question of whether the UK follow suit and face an economic downturn similar to the US?

Here’s why I believe we won’t. The UK has proven its resilience time and time again. And retail, in particular, is no stranger to change.

Already, despite pessimism, we’ve seen the economy exceed expectations in February, with figures showing 0.5% GDP growth as spending continued in the face of increasingly challenging economics.

Our recent survey also revealed that the UK has grown its standing on the world stage, according to global chief executives. It has risen from fourth place last year to second in terms of destinations where chief executives plan to invest capital expenditure, giving reason to believe investment in the UK will remain strong.

The great unknown will be the short- to mid-term global economic outlook. Continued uncertainty might cause consumers to tighten their wallets further, but a smooth and certain resolution could bring a new level of optimism, encouraging consumers to spend.

As the wider political landscape settles, consumers should feel clearer on how much they can spend or how much to pull back. Any certainty will be very welcome.

In the meantime, I’ll continue to fulfil my US colleagues’ requests for tea and biscuits.