Consumer confidence in the U.K. has sharply declined in September, reflecting concerns over personal finances and economic conditions. With borrowing costs expected to remain high following the Bank of England’s decision to hold interest rates, research group GfK reported a significant drop in its confidence index to minus 20, down from minus 13 in July and August. Indicators such as future personal finances, economic outlook, and purchase intentions also worsened.

This decline in sentiment has surpassed economists’ predictions, which had anticipated confidence to remain at minus 13. The pessimism could pose challenges for the recently elected Labour government, which has prioritised economic growth.

Neil Bellamy, GfK’s consumer insights director, said that consumer confidence is critical for driving spending and growth. Despite stable inflation and the prospect of eventual interest rate cuts, he noted that the outlook is not promising for the U.K.’s new government.

The Bank of England’s decision to keep rates steady suggests it will only gradually lower borrowing costs, delaying any potential boost to economic activity. While inflation has been near the 2% target, it is expected to rise later this year due to increasing energy costs and persistent inflation in the services sector.

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