LONDON: UK consumer sentiment has dropped sharply since war broke out in the Middle East, according to a new survey, as the global consequences of the conflict start to take their toll on economies such as Britain’s.
An index tracking confidence in the United Kingdom fell to a four-month low in March, reversing gains made at the start of the year, Barclays said yesterday.
Researchers interviewed around 2,000 consumers between March 3 and 6, days after the United States and Israel launched their attack on Iran, roiling markets and sending oil prices above US$100 a barrel for the first time since 2022.
Around eight in 10 Britons are worried that the war in the Middle East could push up inflation, and specifically fuel and energy bills. Rising food prices and the impact on their personal finances are also major concerns.
Nearly half are already taking action to adjust, for example by cutting energy use, spending less on discretionary items or saving more.
The report provides the first indication of how the war in Iran is impacting British consumers, whose spending drives about 60% of economic activity.
The UK economy began 2026 on a stronger footing, with easing inflation and rising demand boosting confidence among businesses and households.
Jack Meaning, chief UK economist at Barclays, warned that “a new, prolonged bout of uncertainty risks snuffing that out before it has had a chance to really get going”.
The Middle East conflict is derailing both the Bank of England’s (BoE) fight against inflation, as well as the Labour government’s promise to lower living costs.
If the recent jump in gas and oil prices is sustained, some City economists forecast inflation could surge to 5% later this year, more than double the BoE’s target.
Market bets on whether the BoE will cut interest rates have sharply reversed.
Prime Minister Keir Starmer signalled he is considering help for household energy bills, saying that “no matter the headwinds, supporting working people and their families with the cost of living is always top of my mind”.
Economists estimated that last week’s surge in energy prices could add £500 to household costs, wiping out the £150 in savings Labour announced in November.
Consumer spending was sluggish even before the start of the Iran conflict. Barclays said card spending increased 1% in February, rising slower than inflation.
Consumers spent less on essentials, with a majority saying they’re looking for discounts and switching brands to cut costs.
However, non-essential purchases rose at the fastest pace in six months, as new series launches drove spending on streaming subscriptions.
Barclays’ findings chime with a separate report from the British Retail Consortium (BRC).
The BRC said retail sales grew just 1.1% to February, half the 12-month average, while non-food sales posted their sharpest decline since May. — Bloomberg
