British consumers and businesses are feeling the pinch as the United Kingdom approaches a pivotal budget announcement, with fresh data revealing a notable slide in retail sales, consumer morale, and business activity. The upcoming budget, set to be unveiled by Chancellor Rachel Reeves on November 26, 2025, is casting a long shadow over the economy, as both shoppers and companies brace for potentially tougher fiscal measures.
According to the Office for National Statistics (ONS), retail sales volumes dropped by 1.1% in October compared to September, marking the first monthly decline since May. This downturn caught many economists off guard—Reuters had polled experts who expected sales to remain flat. Year-on-year, the picture is equally lackluster: retail sales in October 2025 were only 0.2% higher than the same month in 2024, falling well short of the 1.5% annual increase that had been forecast. As reported by Eastern Eye, the figures underscore the mounting headwinds facing the UK economy just days before the budget announcement.
The mood among consumers has soured as well. The GfK consumer confidence barometer, Britain’s longest-running survey of its kind, dropped to -19 in November from -17 the previous month. Neil Bellamy, consumer insights director at GfK, described the results as "a bleak set of results as we head towards next week's budget," though he noted the level remained within its range of the past six months. The survey suggests the public is "bracing for bad news" in Reeves' budget, according to the BBC.
Retailers, too, are feeling jittery. The ONS noted that supermarket, clothing, and mail order sales all fell in October, with some retailers attributing the decline to shoppers delaying purchases ahead of the annual Black Friday sales at the end of November. As a result, British retail sales volumes are still 3.3% below their pre-pandemic level from February 2020, a sobering statistic for an economy that has struggled to regain its footing since COVID-19 struck.
Rob Wood, chief UK economist at Pantheon Macroeconomics, captured the prevailing sentiment: "The increasingly chaotic run-up to the budget has begun to weigh on consumer spending, judging by confidence nudging down in November and weakening retail sales growth lately." This uncertainty is mirrored within the business community. The S&P Global Purchasing Managers' Index (PMI) preliminary survey for November 2025 showed that both services and manufacturing activity barely grew, performing worse than all economists’ expectations in a Reuters poll. The PMI points to economic growth of just 0.1% for the final quarter of 2025—a figure that hardly inspires confidence.
Chris Williamson, S&P's chief business economist, warned, "There's a real chance this pause may turn into a downturn ... largely linked to speculation that further demand-dampening measures will be introduced in the budget." The survey also revealed that private-sector employment fell at the fastest rate in four months, while prices charged by businesses rose at the slowest pace since December 2020. This combination of weak demand and slowing price growth has fueled speculation that the Bank of England could cut interest rates as soon as next month.
Meanwhile, government finances are under increasing strain. The ONS reported that government borrowing from April to October 2025 reached its highest level for the period in more than 30 years, excluding the extraordinary borrowing seen during the height of the coronavirus pandemic. This fiscal pressure is a key reason why Chancellor Reeves is expected to unveil significant tax hikes in her upcoming budget. According to Eastern Eye, Reeves is likely to raise tens of billions of pounds in taxes—between £20 billion and £30 billion ($26 billion-$39 billion)—in an effort to curb borrowing and reassure bond markets, even as she faces the tricky task of not stifling already fragile economic growth.
Reeves' approach to the budget has been closely watched. Last year, she raised taxes by the most since 1993, with businesses bearing the brunt through higher payroll taxes. This year, speculation swirled that she might break Labour’s election pledges and increase the main rate of income tax for the first time since the 1970s. However, she now appears to favor a collection of smaller measures, possibly to avoid a backlash from voters already expressing dissatisfaction with Prime Minister Keir Starmer's government.
Business leaders, for their part, have been cautious, with many holding off on investment and hiring decisions until the budget details are known. The PMI survey found that companies are "holding back on plans while waiting to see whether taxes will rise for a second consecutive year." The sense of uncertainty is palpable, and as S&P's Williamson put it, "speculation that further demand-dampening measures will be introduced in the budget" is already affecting business sentiment.
Despite the gloom, some bright spots remain. Supermarket giant Sainsbury's and retailer Marks & Spencer have both expressed optimism about their Christmas trading prospects, suggesting that not all consumers are tightening their belts just yet. Additionally, the resilience and innovation of the UK’s business community were on full display at the annual Asian Business Awards in London, where leaders such as Sandy Chadha of Supreme and billionaire investor Cyrus Vandrevala were recognized for their achievements. Secretary of state for housing, communities and local government, Steve Reed, paid tribute to the Asian business community, saying, "Your success is an inspiration, not just to the Asian business community, but to every single part of our country."
Still, the broader economic picture remains challenging. A persistently high savings rate, likely a hangover from the inflation spike in 2022, coupled with a weakening jobs market and looming tax increases, has kept overall consumer spending subdued. For many households, the uncertainty around the budget and the possibility of higher taxes are prompting a cautious approach to spending, especially on discretionary items.
With the budget just days away, all eyes are on Chancellor Reeves and her team. The decisions made next week will not only shape the immediate economic outlook but could also influence the political fortunes of the current government. As the nation waits, the mood is one of anxious anticipation—will the measures introduced stabilize the economy, or will they tip it further towards stagnation?
For now, the UK stands at a crossroads, with consumers, businesses, and policymakers alike hoping for clarity and a path back to sustained growth. The coming week promises to be a defining moment for the country’s economic future.
