Fastest fall since the Brexit vote

GfK's long-running measure of UK consumer confidence dropped 11 percentage points in October to -24, a one-month decline exceeded only once: the record 25-point collapse in March 2020, just after the first UK lockdown began.

The survey has been tracked since the early 1970s and is closely watched by the government and the Bank of England as an early warning sign. Only in July 2016, after the leave result in the EU referendum, did it last fall this quickly outside the pandemic.

• •October's reading: -24, down 11 points on the month
• •Largest ever fall: 25 points, March 2020
• •Previous comparable drop: July 2016, after the referendum result

Cost of living sweeps aside summer optimism

The mood had been very different only months earlier. GfK reported a "Burnham bounce" over the summer, when England's strong World Cup run and sunny weather lifted consumers' spirits.

Neil Bellamy, consumer insights director at GfK, said that what has undone that optimism is "Relentless cost-of-living pressures, against an international backdrop of unresolved regional conflicts" driving 3.5% inflation.

The pressures are visible in household budgets. Petrol and diesel prices have surged close to record highs, and energy bills have risen ahead of a difficult winter, with typical household bills possibly reaching £2,000 a year from January.

TUC analysis puts the cumulative burden at almost £14,000 on average per household over five years in additional mortgage, loan, energy and water costs.

Budget and official figures loom

Chancellor John Healey has pledged to use his budget, due Wednesday, to announce "breathing space" measures, while warning that resources are limited as borrowing costs sit at decades-high levels.

Two sets of official figures landed on Wednesday. Headline inflation rose more than expected to 3.5% last month, and the government deficit came in worse than forecast at £24.5bn.

Spending and business signals weaken

Households appear to be pulling back. GfK's major purchase index fell 14 points to -22 in October, suggesting consumers may rein in spending over the winter.

Business sentiment is also subdued. CBI figures show investment intentions among manufacturers were weak in the three months to October as cost pressures remained high, though the Industrial Trends Survey expects output to stabilise over the next three months.

Cameron Martin, senior economist at the CBI, said the budget must deliver by cutting business electricity costs, reducing labour costs and reforming business rates.

The Treasury has been approached for comment, and Healey's budget is due Wednesday.