Consumer confidence 'collapsed' as Middle East conflict raises concerns about higher inflation

According to new data from the British Retail Consortium (BRC) and Opinium, consumer expectations about the state of the economy dropped to the lowest figure on record, falling to -53 from -30 in February, in light of the Middle East conflict raising the prospect of higher inflation.

Consumers also expect their personal financial situation to worsen, with figures dropping to -17 from -6 in February, also the lowest on record. However, their personal spending on retail rose slightly from 0 in February to +2 in March, while their overall personal spending increased from +6 in February to +13 in March.

UK inflation flatlined at 3% last month, prior to the impact of the Iran war, according to official figures. The rate of Consumer Prices Index (CPI) inflation was unchanged from the level reported in January, in line with economists’ predictions.

However, the steady picture for inflation does not yet reflect the impact of the conflict in the Middle East on the cost of living, with the first attacks taking place at the very end of February.

Oil and gas prices have jumped in recent weeks due to the conflict, and other goods prices could also be affected by disruption to shipping through the Strait of Hormuz. Economists said on Wednesday that inflation is now set to accelerate over the coming months as the impact of the conflict feeds into the price of goods.

According to Helen Dickinson, Chief Executive of the British Retail Consortium, the Middle East conflict and the looming prospect of higher inflation in the months ahead have caused consumer confidence to collapse.

She said: "As stock markets tumbled, confidence in both the economy and personal finances dropped to their lowest levels on record. The drop in confidence was most pronounced among the Boomer generation, who are most reliant on investment and pension funds. Meanwhile, spending expectations rose as shoppers expected to see rising energy costs reflected across the economy.

"The current conflict has created a great deal of uncertainty in the economy. Inflation is expected to rise in the coming months. 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.

"It is now vitally important that Government policy does not exacerbate the situation, and bringing down the cost of living must be a top priority. From new employment laws to rising packaging taxes, Government must focus on how it can minimise unnecessary costs to retailers, thereby helping protect ordinary households from the rising cost of living.”

In February, the BRC shared that consumer confidence had improved for a third straight month to -30 - the highest level since June 2025. Yet the outlook for retailers was dampened by sluggish sales attributed to wet weather.