ICAEW.com works better with JavaScript enabled.
Anzo Francis, LSCA Vice President and Business Board Chair, provides an overview.

Consumers are worried by a number of headwinds battering the economy:

  • Sharp rise in general price inflation.
  • Sharp rises in the cost of gas, electricity, petrol and food.
  • Supply chain issues causing empty shelves.
  • Residual impact of the end of the furlough scheme.
  • Increases in national insurance on the horizon.
  • Appearance of new covid variants.

These factors bring the spectre of an actual cost of living crisis, weighing down on consumer spending, and in turn, weighing down on business confidence.  Those with spare cash will see the real value of those savings fall, due to rock-bottom base rates at 0.1%.

Chart 1 Consumer Confidence

Consumer confidence barometer

Chart 1 from GfK shows movements in personal financial situation, general economic situation, the major purchase index, and the savings index since November 2020. All six indices improved dramatically from November 2020 to September 2021. That was followed by a significant reversal in October 2021, then a slight improvement in November 2021.

The CBI’s quarterly business survey also confirms the significant drop in business confidence in Q4. Business concerns are many, and include the following:

  • Supply chain concerns
  • Shortage of materials and components
  • Labour shortages
  • Skill shortages
  • Rise in input costs
  • Inflation

Chart 2 Business Confidence Sep21-Dec21

Business confidence chart

Chart 2 from Trading Economics shows a 25 point drop in business confidence, and a 27 point drop in small business sentiment. Industrial production is down, manufacturing production is down, new orders are down, profits are down, car production is down, and car registrations are down. On the plus side, there is a rise in factory orders.

Chart 3 Retail Price Inflation (RPI)

RPI chart

Underpinning the problem is the damaging rise in inflation. Chart 3 published by the Office for National Statistics, shows how RPI rose to a high of 6% in October 2021. CPI is above 4%, more the 2% above the Bank of England’s target range. The outlook is poor, with the Bank of England forecasting further rises in CPI next year, to a peak of 5% by April 2022.


Consumers and business will need to ‘tighten their belts’ in the short term, to ride the economic waves, this Christmas and into 2022.

Anzo Francis

Vice-President LSCA and Business Board Chair.