Economic optimism slumps to lowest level since records began
Brits’ optimism in the state of the UK economy has fallen to the lowest level since records began in a fresh blow to Rachel Reeves, with the majority expecting the situation to get even worse.
That’s according to new data from the latest Ipsos Economic Optimism Index (EOI), published the same day that the rate of inflation ticked up to 3.3 per cent.
The survey found that 78 per cent expect the economy to get worse over the next 12 months, whilst 12 per cent think it will stay roughly the same and only six per cent believe that conditions will get better.
That means that net optimism in the British economy sits at a miserable -72.
Brits feel bleaker about the economy than they did in the depths of the Covid-19 pandemic, and in the wake of the cost of living crisis sparked by Russia’s illegal invasion of Ukraine in 2022.
Previous lows since Ipsos started collecting the data in 1978 include January 1980, when the UK was gripped by recession, and July 2008 as the world was convulsed by the Financial Crisis.
Economic woes top Brits’ list of worries
This latest data release has found that 33 per cent of the public now sees the economy as the biggest issue facing Britain, overtaking immigration at 32 per cent.
And amidst escalating worries about knock-on effects from the war in Iran, concerns around inflation have overtaken defence and foreign affairs issues in third place.
Gideon Skinner, Ipsos’ senior director of UK politics, said of the data: “Whilst attention is focused on Westminster, the latest Ipsos Economic Optimism and Issues Index is a reminder that the public are also concerned about issues like the economy and inflation, immigration, defence, and public services, and that dissatisfaction with the state of the country has been entrenched for some time.”
He added that though the public does understand that the country is being increasingly battered by global economic headwinds, “Labour needs to convince the public that they can deliver a more optimistic outlook for the economy if they want to turn their political fortunes around.”
Does rising inflation mean interest rate hikes?
The Bank of England’s Monetary Policy Committee (MPC) will meet next week to make its latest interest rates decision.
According to some economists, the central bank is likely to make at least one rate hike in 2026 in response to the energy price shock while governor Andrew Bailey has cautioned against speculation that Threadneedle Street could unleash multiple hikes this year.
Policymakers have pledged to set a “high bar” for any change in rates this year, according to top City analyst Simon French.
The last energy shock, in the wake of the invasion of Ukraine, sent inflation spiralling to 11 per cent and interest rates up to 5.4 per cent – up from a baseline of less than one per cent at the time.
Though, in perverse relief for the British economy, a recent research note from investment bank Berenberg argued that the UK labour market is simply too weak to replicate that kind of sky-high inflation.