BRC says shoppers have turned sharply more pessimistic as rising energy costs threaten household finances and retail spending

Consumer confidence in the UK has fallen sharply following the outbreak of war involving Iran, as rising energy prices and mounting inflation fears weigh heavily on household sentiment, according to new research from the British Retail Consortium.

A survey conducted by Opinium on behalf of the BRC found that almost two-thirds of consumers expect the UK economy to worsen over the next three months. Some 64 per cent of respondents said they believed economic conditions would deteriorate, while just 11 per cent said they expected things to improve. That left the overall balance at minus 53, a steep drop from minus 20 a month earlier.

Shoppers have also become markedly more downbeat about their own finances. The survey found that expectations around personal financial prospects fell to minus 17 in March, down from minus 6 in February.

The findings point to a rapid deterioration in sentiment as the conflict in the Middle East pushes up oil and energy prices, stoking fears of a fresh inflationary squeeze just as the UK had been showing signs of stabilisation.

BRC chief executive Helen Dickinson said the conflict had badly shaken consumer confidence at a particularly fragile moment for the economy.

“Consumer confidence collapsed as the Middle East conflict raised the prospect of higher inflation in the months ahead,” she said.

“Just as the economy was beginning to turn a corner on inflation, the rise in global energy prices is particularly unwelcome for businesses and families.”

The sharp rise in prices has been linked to disruption in the region, including the effective closure of the Strait of Hormuz and attacks on infrastructure, both of which have intensified concerns around global energy supply and wider inflationary pressure across oil-importing economies such as the UK.

The gloomy sentiment comes as analysts revise down UK growth forecasts for 2026, amid growing concern that higher fuel and energy costs will leave households with less to spend elsewhere.

It also follows official figures showing inflation held at 3 per cent in February, before the full economic impact of the conflict began to feed through. While that figure had initially offered some reassurance, expectations for the months ahead have shifted significantly.

As recently as last month, the Bank of England had expected inflation to return to the government’s 2 per cent target in the spring, a move that could have paved the way for further interest rate cuts. However, at its most recent meeting, the Monetary Policy Committee kept rates on hold and signalled that the next move could yet be upwards rather than down.

There are already signs that higher costs could begin to ripple through the food supply chain too. While February’s inflation figures were helped by slower food price inflation, aided by falling prices for products such as olive oil, flour and pizza, industry leaders have warned that may prove short-lived.

Food and Drink Federation chief executive Karen Betts said the sector was bracing for further cost pressures if the conflict continues.

“The longer the conflict in the Middle East goes on, the bigger its impact will be on food prices,” she said.

“With food and drink price inflation already running above historical averages, heightened energy, maritime fuel and fertiliser costs will put further pressure on prices.”

The Office for National Statistics said the February inflation reading had been pushed up by higher clothing prices, though this was partially offset by declines in other categories. ONS chief economist Grant Fitzner noted that petrol prices had still reflected data collected before the latest escalation in the Middle East.

“The largest upwards driver was the price of clothing, which rose this month but fell a year ago,” he said.

“This was offset by falls in petrol costs, with prices collected before the start of the conflict in the Middle East and subsequent rise in crude oil prices.”

Since then, petrol prices have risen significantly. According to the RAC, the price of a litre of unleaded increased by 12p by the end of last week, representing a rise of around 9 per cent.

The Treasury is now understood to be drawing up contingency plans in the event ministers decide to intervene later this year to shield households from surging energy bills. Chancellor Rachel Reeves has indicated that any support would be targeted at those most in need, rather than offered universally.

Businesses are also being urged not to lose sight of international opportunity despite the increasingly difficult backdrop.

British Chambers of Commerce director general Shevaun Haviland is expected to tell member companies this week that, while the global economy is under severe strain, firms should continue to pursue export growth rather than retreat.