The true indicator of the UK's economic health might surprise you—by revealing deeper insights than the headlines suggest. And here’s where it gets controversial... A fresh new year offers a chance to reconsider policies, perceptions, and the very vibes that underpin our economy. While the latest monthly data doesn’t signal a dramatic shift, it also doesn’t confirm doomsday predictions of recession. Instead, it hints at a nuanced landscape—neither booming nor collapsing—and provides an opportunity to clear the slate and reassess the economic outlook.
There’s one particular chart that could unlock a wealth of understanding about both the current state and future prospects of Britain’s economy—and it may even reflect the political mood of the nation. That chart tracks consumer confidence—a long-term survey that essentially puts the country on an economic psychological couch. It asks questions like: How optimistic do you feel about the economy? Are you planning major purchases? How are your personal finances holding up?
This data has been collected consistently for over five decades through the GfK Consumer Confidence Barometer. As an observer, I’ve been tracking this metric for much of that time. Although it’s imperfect, the key is calculating the 'net confidence' score: the optimism percentage minus the pessimism percentage.
Historically, these confidence levels moved together, providing a reliable political indicator—as the famous phrase "It’s the economy, stupid" reminds us. They served as a predictor of electoral outcomes: if people felt good about the economy, politicians enjoyed a better chance of staying in power.
But recent developments suggest something fundamentally different is happening. A particular chart, some versions of which have circulated among government officials, deserves close attention. To understand it, let’s break it down.
This chart segments the overall net confidence score by age groups. In the past, these lines roughly moved in tandem, reflecting a shared economic sentiment across demographics. Younger people tended to start with more optimism, but their confidence waned as they aged—unsurprising, perhaps, given life stages—and everyone reacted similarly to big events.
Over the last ten years, we see a marked decline across all age brackets, notably following the Brexit referendum and the COVID-19 pandemic, which shook consumer confidence universally. The 2022 mini-budget introduced by Liz Truss was particularly disastrous for all age groups, leading to a rapid erosion of faith in the government’s economic stewardship.
Up until 2024, these confidence levels remained synchronized—declining or rising together. But then, around late 2024, something striking occurs: a clear divergence emerges.
Young adults under 50, especially those under 30, saw their confidence rebound sharply, reaching levels unseen since Brexit. In contrast, confidence among over-50s and over-60s plunged back toward the low points of the Truss era. How can older citizens, especially pensioners, become so pessimistic again while younger generations grow more optimistic?
The timing suggests a connection with the 2024 General Election. While correlation doesn’t necessarily imply causation, the moment these confidence shifts appeared precisely aligns with this political event.
One compelling theory from the field of political economy is that the causal relationship has flipped. Historically, economic sentiment influenced voting decisions; now, voting choices seem to be shaping economic perceptions. Younger voters, largely on the liberal left, are more positive post-election—having endured a turbulent decade of crises—and are now more hopeful about the future with the government they supported.
Meanwhile, older voters, mainly conservative and reform-minded, remain dissatisfied, feeling the country is worsening. A possible factor here is the influence of social media and its often dystopian, emotion-driven content, which might be amplifying fears among older demographics.
Supporting this idea, similar patterns have been observed in the US. A consumer sentiment survey in late 2020 showed that Democrats’ confidence surged dramatically after the transition from Trump to Biden—while Republicans’ confidence plummeted. Interestingly, insiders in Biden’s team even coined the term “Vibecession” to describe a perceived economic gloom that contradicted the real economic data.
Beneath these sentiment shifts, several economic elements are also playing a role. The confidence boost among the young coincided with the Bank of England’s interest rate cuts, which generally benefit first-time homebuyers and younger workers but hurt savers—mainly older people—who are sitting on substantial savings, perhaps feeling despondent and less willing to spend.
This scenario could help explain some of the unusual economic indicators, such as Britain’s surprisingly high savings rate—close to double digits—which looks more like a pandemic anomaly. Many older citizens appear to be hoarding cash, wary of the economic outlook, contributing to lower overall spending and possibly restraining GDP growth, even amid wage increases that outpace inflation.
These confidence trends seem to be echoed in recent retail results, which have challenged the gloom. Many retail chains report strong sales and profits, despite ongoing concerns about rising costs. For example, Mitchells & Butlers experienced a robust holiday season with 7.7% growth in comparable sales, and Fullers reported an outstanding Christmas period 8% better than last year.
While inflation remains a concern, it’s gradually heading toward the 2% target, partly due to government efforts to hold down regulated prices in sectors like water and transportation. With gradual rate cuts on the horizon, borrowing costs for households may soon decline—potentially sparking a bounce-back in the housing market after months of uncertainty.
The government is betting on an investment-driven recovery, highlighted by recent announcements about Heathrow expansion and new train links in the north. These projects aim to set the stage for a promising 2025, possibly defying the current doom-mongering. Yet, could the increasingly polarised perceptions of economic confidence—shaped heavily by political and social influences—be a hidden obstacle to this recovery?
In the end, the key question remains: Are we truly witnessing a shift in the economic mood—marked by the polarization of confidence levels across ages—or is this just another political mirage? And more broadly, how much do you believe that public sentiment influences economic realities? Share your thoughts—do you agree that perceptions now are shaping economic outcomes more than ever before?
