Consumer confidence in the UK took a significant hit in September, with the GfK Consumer Confidence Index dropping seven points to -20, raising concerns that government warnings about impending Budget “pain” may have unsettled the public.

The index had been showing signs of recovery after years of economic crises, rising interest rates, and creeping inflation. However, economists are now linking the sharp decline to officials’ warnings at the end of August about a tough upcoming Budget.

GfK reported “major corrections” in consumers’ perception of the general economic situation and a noticeable drop in their willingness to make large purchases. Additionally, confidence in personal finances over the next year turned negative, falling by nine points to -3—a measure that had previously been a bright spot under former Prime Minister Rishi Sunak, who touted it as a sign of economic improvement.

The sudden drop surprised experts, particularly following an interest rate cut from the Bank of England that was expected to ease financial pressure on homeowners. Despite inflation stabilizing and the possibility of more rate cuts, other indicators of consumer confidence also weakened.

Neil Bellamy, GfK’s consumer insights director, suggested the public is anxiously awaiting the 30 October Budget, particularly after the withdrawal of winter fuel payments and looming “difficult decisions” on taxes, spending, and welfare. Bellamy described the latest data as “not encouraging news” for the UK’s new government.