Retailers Warn Consumer Confidence Falling As High Business Costs Threaten Budget

Consumer confidence fell in September 2026 for the first time in four months, driven by escalating business costs, retail tax pressures, and mounting household financial fears. According to the British Retail Consortium (BRC) and Opinium, high inflation and government debt concerns are weighing on consumer spending ahead of the autumn Budget.

The Bottom Line

The Pressure Points: UK retailers face a severe “triple blow” from soaring business rates, employment costs, and energy bills, threatening high street margins.
Consumer Retrenchment: Nearly half of surveyed Brits expect the broader economy to worsen over the next three months, prompting cutbacks in discretionary categories like apparel and electronics.
Macroeconomic Squeeze: Private sector growth slowed to a three-month low in September, with the S&P Global PMI index slipping to 51.7 as high borrowing costs and regulatory burdens discourage corporate hiring and investment.

Retailers Sound the Alarm Ahead of the Budget

As the UK prepares for the autumn fiscal statement, major high street operators represented by the British Retail Consortium—including retail giants like Tesco (LON: TSCO), Sainsbury’s, and Marks and Spencer—have urged Chancellor John Healey to slash the burdensome costs of doing business. The call for intervention follows a sharp downturn in consumer sentiment. According to data released by the BRC and Opinium, consumer confidence dropped in September for the first time in four months.

Nearly half of all surveyed UK consumers now anticipate that macroeconomic conditions will deteriorate over the next quarter, up from 44 per cent in August. Furthermore, almost a third expect their personal financial situations to worsen in the near term, rising from 28 per cent in the previous month. Households are actively trimming discretionary budgets. The survey revealed that 13 per cent of consumers intend to spend less on clothing (compared to 11 per cent in August), while those planning to cut back on electronics increased from 11 per cent to 12 per cent.

“[Consumers] want to see the government prioritise bringing down the cost of living at Healey’s first budget next month,” said Helen Dickinson, chief executive of the BRC. “Retail will play its part, but the Chancellor must not compound the triple blow from escalating employment costs, energy bills, and business rates, allowing retailers to focus on holding prices down.” Dickinson specifically called for the government to freeze the business rates multiplier to prevent another tax increase.

Wider Economic Slowdown and S&P Global PMI Data

The consumer pullback mirrors a broader deceleration across the UK economy. Private sector growth slowed to a three-month low in September, reflecting mounting corporate cost pressures and fading business confidence. The closely watched S&P Global PMI index, tracking manufacturing and services, slipped from 52.5 in August to 51.7 in September.

Chris Williamson, chief business economist at S&P Global, noted that the data points to a quarterly growth rate of a mere 0.1 per cent. “September is seeing a worrying combination of disappointingly sluggish economic growth and intensifying inflationary pressures, with subdued business confidence and high costs meanwhile continuing to discourage hiring,” Williamson stated. He added that growth, confidence, and employment are being constrained by high energy prices, elevated business expenses, geopolitical risks, higher market borrowing costs, and domestic policy uncertainty.

Comparative Business Tax Burdens and G7 Energy Realities

The macroeconomic headwinds facing UK commerce extend far beyond the retail sector. According to a comprehensive 75-page report published by the Confederation of British Industry (CBI), UK businesses paid almost £345bn in taxes during the 2025–26 fiscal year. That figure represents an increase year-on-year, accounting for 31.3 per cent of total UK tax receipts.

Employer national insurance contributions—increased in the Labour government’s first budget in 2024—surged to £123.1bn in 2025–26. This marked a 28 per cent increase year-on-year, pushing the levy past corporation tax to become the single largest source of business tax revenue. Concurrently, operational overheads remain heavily skewed by utility expenses; the CBI’s analysis highlights that UK non-domestic electricity prices were about 45 per cent above the G7 median across 2023 and 2024.

UK Business Tax and Macroeconomic Metrics (2025–26)
Metric	Figure	Change / Context
Total Business Tax Receipts (2025–26)	£345bn	Up YoY (CBI Data)
Employer National Insurance Contributions	£123.1bn	Up YoY; largest business tax source
S&P Global UK PMI (September)	51.7	Down from 52.5 in August (three-month low)
UK Non-Domestic Electricity Prices	Above G7 Median	Based on 2023–2024 comparative analysis

Rain Newton-Smith, chief executive of the CBI, emphasized the direct link between commercial overheads and everyday household expenses. “When firms are forced to absorb higher taxes, energy bills and regulatory costs, the consequences are weaker investment, fewer jobs and less scope to raise wages,” she said. Meanwhile, the British Chambers of Commerce (BCC) reported that domestic policy shifts have inflated operating costs for typical small and medium-sized enterprises by 70 per cent over the past decade.

Market Trajectory and Fiscal Policy Uncertainty

As Prime Minister Andy Burnham’s administration approaches its maiden fiscal statement, executives across retail, manufacturing, and services await concrete measures to ease balance sheet pressures. The intersection of sluggish consumer demand, restrictive borrowing costs, and elevated tax burdens leaves corporate leaders with narrow operating margins. Whether the Chancellor’s upcoming announcements provide structural relief or merely sustain existing fiscal headwinds will determine corporate investment trajectories heading into the final quarter.