Confidence slumps amid Budget fears and cost of living pain

Business and household confidence is slumping amid fears of a brutal Budget next week – and as soaring food prices pile pressure on families.

The warning signs for Chancellor Rachel Reeves came as it was claimed Britain is living beyond its means and must cut rampant spending.

Yesterday, official figures showed stubbornly high inflation of 3.6 per cent – well above the 2 per cent target – continues to gnaw at living standards.

Food price inflation has increased to 4.9 per cent – blamed by the industry on higher costs imposed by the government.

And a poll by the British Retail Consortium (BRC) today (THURS) reveals that weeks of ‘tumultuous’ speculation ahead of the Budget has further crushed consumer sentiment.

The pressure is also telling on the housing market, as separate figures showed falling prices and buyers becoming hesitant amid uncertainty over the Chancellor’s tax plans.

Food price inflation is rising – blamed on costs imposed by the government

It came as more business leaders added to the growing chorus of dismay over Labour’s dismal handling of the economy.

Lord Stuart Rose, the former boss of Marks & Spencer and Asda, said: ‘If you talk to people in business and you talk to people in the street they’re fearful, they’re demotivated, they’re anxious and they’re certainly very anxious now about what’s going to happen next week.’

Fears are growing that Ms Reeves will implement a series of tax hikes at the Budget, adding to the damage done by the £25 billion raid on employer national insurance (NI) announced last year.

Taxes are likely to go up because the Chancellor faces an estimated £30 billion black hole in the public finances.

But Lord Rose urged Labour to look at bringing spending under control too – as the cost of welfare, pensions, the civil service and long-term sickness spiral.

‘We are now living above our means… it’s unsustainable,’ he told the BBC, accusing the government of failing to get to grips with long-term issues.

‘It’s shambolic what we’ve got at the moment, we’re running an economy now where it’s run by opinion poll and it’s run by focus groups, it’s nonsense.’

Meanwhile, Paul Greenwood, a top UK executive at US oil giant ExxonMobil, accused the government of ‘deliberate’ policy choices that are ‘undermining’ the company.

Mr Greenwood was speaking a day after the firm announced that it was closing a chemicals plant in Scotland, putting more than 400 jobs at risk.

He blamed windfall taxes on North Sea oil and gas producers that are causing the industry to shrink as well as sky-high energy costs that are blighting UK industry more widely.

‘The government needs to understand that the whole industrial base in UK is at risk unless they wake up and see the damage that their economic policies are doing,’ Mr Greenwood told the BBC.

Elsewhere, a survey of businesses by Santander UK showed they were under increasing strain from rising labour costs, tax and energy.

The bank’s chief economist Frances Haque said the findings painted ‘a stark picture of a challenging business landscape’.

Figures from the BRC show consumer confidence at its lowest level since ‘awful April’, a period when bills and taxes previously went up.

‘It has been a tumultuous month of Budget speculation and consumer confidence took a tumble,’ BRC chief executive Helen Dickinson said.

Yesterday, the Office for National Statistics (ONS) said that inflation fell to 3.6 per cent in October, down from 3.8 per cent in September.

It remains the highest among all of the G7 group of advanced economies.

Julian Jessop, economics fellow at the Institute of Economic Affairs, a free-market think-tank, said that the gap between inflation in the UK and Europe remained ‘worryingly large’ with Britain now ‘clearly an outlier’.

Ms Reeves said she recognised that inflation was ‘still a big burden on families right across the country’ and was planning to take ‘targeted action’ tackle the cost of living.

Separate ONS figures showed UK annual house price growth slowed from 3.1 per cent in August to 2.6 per cent in September. Prices fell over the course of the month by 0.6 per cent. In London, prices fell by 1.8 per cent compared with a year earlier and 1.1 per cent on the month.

Meanwhile, a survey from property website Rightmove showed 17 per cent of potential movers have paused their plans due to uncertainty over property taxes in the Budget.