A new year, a new beginning... maybe?

And yet, if you look at the latest monthly economic figures, they don’t exactly scream boom time. But equally, they don’t back up the loudest doom-mongers shouting 'recession' from the rooftops.

So where are we?

Somewhere in the middle. Not doom. Not boom.

But vibes matter, probably more than we like to admit. And there is one chart doing the rounds in government circles that explains a lot about where the UK economy is heading… and arguably where UK politics is heading, too. The chart in question tracks consumer confidence.

These surveys are effectively the UK lying back on an economic psychiatrist’s couch and answering questions like:

• How do you feel about the economy?
  
• How are your personal finances?
  
• Are you likely to buy something big?

The most widely used measure is the GfK Consumer Confidence Barometer, which has been running for decades. It’s not perfect, but it’s consistent, optimism minus pessimism gives you a net confidence score.

What’s interesting, and genuinely quite striking, is when you split consumer confidence by age group.

For decades, the pattern was simple:

• Younger people are more optimistic
  
• That optimism fades with age
• Everyone broadly reacts the same way to big events

Brexit? Everyone dips. Pandemic? Everyone dips harder.

Ukraine war and energy prices? Another sharp drop across the board.

Even the Liz Truss mini-budget in 2022 shows up very clearly. Confidence collapsing across all age groups. A brutal 45 days.

And up until late 2024, all age groups move together.

Then something changes. From late 2024 onwards, confidence diverges sharply.

• Under-50s start to feel more positive
  
• Under-30s soar to confidence levels not seen since before Brexit

But look at the other side:

• Over-50s confidence drops hard
  
• Over-60s slide back toward Truss-era lows

So what on earth is going on?

One possible explanation (and this is where it gets uncomfortable) is that the usual relationship has flipped.

Historically, how you felt about your finances influenced how you voted. Now, how you voted influences how you feel about the economy.

That divergence happened around the 2024 General Election.

Younger voters, broadly more liberal and more likely to have voted for the current government   suddenly feel more optimistic. After years of Brexit, Covid, energy shocks and political chaos, they feel relief. Maybe even hope.

Older voters, many of whom backed Conservatives or Reform, feel the opposite. For them, the country feels like it’s fooked, Confidence collapses, even if the numbers don’t fully justify it.

Correlation isn’t causation… but it’s hard to ignore.

Another factor? Social media - my favourite topic. Algorithms love outrage. Doom sells better than stability.

If your feed is constantly telling you the UK is finished, broken, unrecognisable — eventually that seeps into how you feel about your finances, regardless of reality.

There’s evidence of this elsewhere too.

In the US, during the switch from Trump to Biden:

• Democrat voters’ economic confidence surged
  
• Republican voters’ confidence collapsed

Same economy. Different politics. The Biden team even coined a term for it: “the Vibecession” ('bad vibes, decent data').

There’s also a very real economic reason for the age split. This rebound in younger confidence lines up with when the Bank of England started cutting interest rates.

Rate cuts: Help first-time buyers, Help jobseekers, Help people with big mortgages, But they hurt savers.

And who holds most of the savings? Older generations. That might explain another oddity in the data…

The UK savings rate is still unusually high, almost pandemic-like.

That drags on GDP, even though, Wages are rising, Inflation is falling, employment remains strong. In simple terms: the people with the money aren’t confident enough to part with it.

Businesses don’t look as gloomy. Interestingly, this confidence split shows up in company results too.

Despite plenty of noise about tax rises and National Insurance:, Many retailers are trading well, Sales and profits are holding up, Pub groups are a good example:

• Mitchells & Butlers saw like-for-like growth of 7.7% over Christmas
  
• Fullers reported an “outstanding” festive period, up 8% on last year

Hardly the apocalypse. Yes, prices are still high. But inflation is coming back toward 2%.

Regulated price rises are being restrained. Rate cuts are filtering through slowly.

And a mortgage price war may not be far off.

So… doom or opportunity?

The government will be desperate to draw a line under recent chaos and push the narrative toward: investment, infrastructure, stability.

Heathrow expansion. Northern rail projects. Long-term planning (finally).

On paper, there’s a platform to defy the doom.

The real question is this: If economic confidence has become politically charged, driven more by how people feel than by what the numbers say, does that become a brake on recovery?

Because confidence, like spending, is contagious. And right now, Britain is split.

Lots to digest.

As ever, if you want to talk through what this actually means for you or your business, give me a call.

Lloyd

The Finance Guy