Consumers feel better – so why are they planning to spend less?

Confidence is up but spending is down – which figure should small firms trust?

Britain's consumers are apparently feeling their most confident for more than two years, but another survey says they're getting more worried about their finances and planning to spend less in the shops. Both can be true, and that's the problem for small businesses trying to decide how much stock to order, whether to hire, what to charge and whether it's finally safe to invest. Forget the headline confidence number: what matters to a small business is whether customers actually open their wallets.

CONFIDENCE TRICKS

Up or down? Consumer confidence is sending mixed signals again. GfK’s latest barometer shows confidence rising to a two‑year high, hitting minus 13 in September, the strongest reading since August 2024 and the first three‑month run of improvement in over a year. Some put it down to a “Burnham bounce”.

Other surveys, including the British Retail Consortium‑Opinium one, from a few days earlier, show confidence slipping, with households preparing to cut back on discretionary spending as inflation edges up, mortgage rates rise, and concerns about government debt and possible interest rate rises grow.

Rising or falling? That is the question and for small and micro businesses, the answer can be a life-or-death issue.

Different surveys measure different things

GfK focuses on personal finances and economic expectations. Retail‑sector surveys focus on spending intentions. That means people may feel more optimistic but still plan to spend less. For small businesses, sentiment and spending are not the same and you need to track both.

Another issue with stats is that surveys are carried out over different periods of time with some looking further back than others. Given the volatility in the oil prices feeding into energy prices for example, and the impact of conflict on food and material prices, what was true 2 months ago when figures were collected, may be well out of date by the time the findings are published. The closer we can get to real-time data the better the decisions we can make.

Up but fragile

GfK shows optimism about personal finances, the wider economy and the next 12 months.

The retail focussed BRC‑Opinium survey shows rising anxiety about inflation. More households expect their finances to worsen and so they are planning to cut spending on clothes and electronics and anything else that’s not essential.

This is classic “fragile confidence”: people feel better but not secure enough to spend freely.

Behaviour

Small businesses rely on real‑time consumer behaviour, not long‑range forecasts. Conflicting confidence data affects how they plan and run their businesses.

Sales forecasts: You can’t plan stock, staffing or cashflow if you don’t know whether customers will spend or save.

Pricing decisions: If confidence is rising, small firms can hold or raise prices. If confidence is falling, they may need promotions or bundles to attract customers.

Investment and hiring: Micro businesses pause investment when confidence dips but miss opportunities if confidence is improving.

Cashflow risk: Confidence swings translate directly into slower footfall and smaller or delayed purchases. Customers are more sensitive to prices and small firms feel this instantly.

Not stable

The data shows confidence rising on the one hand and spending caution increasing too. Both can be true at the same time. People feel better but not enough to spend confidently. For small businesses, this means prepare for volatility, not a boom.

Cautious Optimism

Consumer confidence is rising on paper but wobbling in practice. For small and micro businesses, knowing the truth matters because confidence drives sales, pricing, staffing, investment and survival. The smart move now is to plan for cautious optimism: steady demand, not strong demand; selective spending, not free spending.

However, if the oil prices remain high and translate into higher energy bills and high prices at the pumps caution could be increasing and optimism could be on the way by the time the surveys are carried out next. The closer we can get to real-time data the better-informed businesses will be.