Consumer confidence 'collapsed' after Iran war as economic gloom gathers
Consumer confidence has ‘collapsed’ after war in the Middle East has opened the door to higher inflation.
The worrying survey from the British Retail Consortium and pollsters Opinium - which comes just as Labour had insisted there were green shoots appearing in the economy - shows that Brits’ confidence in both the economy and personal finances dropped to their lowest levels on record.
It comes as there have been fresh concerns that grocery bills will spike as energy costs soar after US-Israeli attacks in Iran last month triggered weeks of conflict.
Consumer expectations for the state of the economy over the next three months worsened significantly to -53 in March, down from -30 in February.
And forecasts for their personal financial situation worsened to -17 in March, down from -6 in February.
It comes as industry experts warned that this week’s falling food inflation data was ‘the calm before the storm’ ahead of looming price rises.
The survey spells bad news for the High Street and Britain's economic recovery
Helen Dickinson, chief executive of the British Retail Consortium, said: ‘Consumer confidence collapsed as the Middle East conflict raised the prospect of higher inflation in the months ahead. As stock markets tumbled, confidence in both the economy and personal finances dropped to their lowest levels on record.
She added: ‘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.’
‘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.’
And she sounded the alarm over the impact of Labour’s new package of rights for workers at a time of rising unemployment, as well as a slew of business cost increases set to come in this year.
Dickinson added: ‘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.’
Food and soft drink prices rose by 3.3 per cent in the year to February, according to the Office for National Statistics - down from 3.6 per cent in January.
But it is expected that shoppers will start to see the impact of the war at the tills in the coming months
Karen Betts, chief executive at the Food and Drink Federation (FDF) said: ‘“While food inflation fell slightly in February 2026, I am concerned that this is the calm before the storm. The longer the conflict in the Middle East goes on, the bigger its impact will be on food prices. With food and drink price inflation already running above historical averages, heightened energy, maritime fuel and fertiliser costs will put further pressure on prices.
'While it can take several months for cost rises to filter fully through to shop shelves, the cost of the Iran conflict will be felt by shoppers this year,' she warned.
The Institute of Grocery Distribution has warned that a shock spike in energy bills could end up heaping an extra £150 to the average household’s annual grocery bill.
The Government must provide the food sector with 'at least the same support as other manufacturing sectors', in order to tackle the rocketing cost of living, Betts said.
And the boss of Morrisons has said the supermarket is ‘alert’ to the war in the Middle East and says it is 'tough' for consumers.
Chief executive Rami Baitiéh said: ‘We know it’s tough for customers right now and we’re doing everything we can to offer them better value and give them more reasons to shop at Morrisons.’
He said: ‘We are watching current international events closely, alert to the impacts on consumer confidence and supply chains, and we will continue to do what we can to mitigate effects on our customers.’
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