Consumer confidence dives as rising prices put gloomy households under ‘considerable financial stress’

British families are under ‘considerable financial stress’ ahead of the Budget as the cost-of-living soars, according to a report.

S&P Global said its UK consumers sentiment index – where scores below 50 indicate gloom among households – fell to 47.4 this month from 47.8 in September.

This was above recent lows below 40, with the report noting: ‘The autumn is seeing some of the gloom lift from UK households.’

However, with prices of everyday essentials such as food and energy rising, consumers are feeling the pinch.

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Analysts warn that official figures on Wednesday could show inflation rose to 4 per cent in September from 3.8 per cent in August. That would be the highest among the Group of Seven major developed nations and twice the Bank of England’s 2 per cent target.

Inflation was as low as 1.7 per cent before the Budget last October, with large increases in the minimum wage and the £25billion national insurance tax raid blamed for lumbering business with extra costs which in turn pushed up prices.

Marks & Spencer chief executive Stuart Machin described the national insurance hike as ‘catastrophic’ and called for ‘no more taxes that hit consumers and the everyday economy’.

He added: ‘The Chancellor has two paths ahead of her. More of the same: plugging fiscal holes with tax rises, stoking inflation and suppressing demand. Or change course: spend less, borrow less, tax less, regulate less, reduce inflation and enable growth.’

Maryam Baluch, an economist at S&P Global, said: ‘It’s clear the cost-of-living crisis has not yet been beaten. Although incomes are up, households report lower levels of available cash as high bills eat into the amount of money left to spend. The gloom may be lifting, but that’s not to say households don’t remain under considerable financial stress, with lower earners reporting particular concerns.’

M&S chief Stuart Machin and Chancellor Rachel Reeves

The International Monetary Fund last week warned that Britain faces the highest rate of inflation in the G7 this year and next.

And Bank of England chief economist Huw Pill said concerns about inflation merit ‘a more cautious pace’ in cutting interest rates in a blow to millions of households hoping for cheaper mortgages.

‘The need to recognise the stubbornness of inflationary pressures is becoming more pressing,’ he said in a on Friday. ‘It will continue to be important to guard against the risk of cutting rates either too far or too fast.’

The Bank has cut rates four times since August last year, from 5.25 per cent to 4 per cent, but persistent concerns about inflation mean progress has been slow.

According to bets on financial markets, there is just a 15 per cent chance of another rate cut next month and 40 per cent chance of one in December. It is thought rates will be cut again early next year, in February or March.