Almost £1 billion was wiped off the stock market value of Britain’s biggest retailers on Tuesday after Deutsche Bank warned that consumer confidence is sliding sharply ahead of the autumn budget.
The bank’s so-called fear index points to rising anxiety across all income groups, with shoppers concerned about job losses, frozen tax thresholds, and the prospect of further fiscal tightening from Chancellor Rachel Reeves.
Deutsche analysts downgraded Associated British Foods – owner of Primark – to “sell”, citing the squeeze on lower-income households. Shares in ABF fell 92p, or 4 per cent, to £22.22, its worst day since April.
DIY retailers were also hit. Wickes, downgraded to “sell”, slumped 8.6 per cent to a three-month low of 201½p. Kingfisher, the B&Q parent, was cut to “hold” and dropped 4.3 per cent to 269p. Home improvement supplier Marshalls, not directly mentioned in Deutsche’s note, still fell 3.2 per cent to 182¼p – its lowest in a decade.
Next, placed on Deutsche’s “least preferred” list, slipped 0.2 per cent to £122.05. Online retailer Asos also lost ground, down 1.6 per cent at 302p.
In total, the combined market capitalisation of these six companies fell by around £965 million.
Deutsche Bank’s analysis of household cashflows suggests Britons are holding back on discretionary spending despite higher wages, with many saving more as a hedge against uncertainty.
The index showed that, unusually, higher-income households are now more worried about the financial outlook than lower-income groups. Analysts said wealthier consumers are increasingly sensitive to potential tax rises in October’s budget, while the poorest families remain under pressure from inflation.
The latest figures from the Office for National Statistics showed inflation rising to 3.8 per cent in July, driven by a 4.9 per cent jump in grocery prices – the sharpest increase since February 2024. The Bank of England expects food inflation to climb above 5 per cent in the coming months.
Personal tax thresholds remain frozen, and businesses continue to absorb the £25 billion increase in employers’ national insurance contributions, further weighing on the labour market.
According to Asda and the Centre for Economics and Business Research (Cebr), middle-income families saw their disposable spending power fall by 1.6 per cent in July – the first decline since September 2023. For the lowest-income households, the hit was far worse, with disposable incomes dropping by 11.1 per cent, leaving a shortfall of £73 once essentials and taxes were accounted for.
Sam Miley, head of forecasting at Cebr, warned that while wages are edging higher – with private sector pay rising 4.8 per cent in the three months to June – inflation continues to erode purchasing power.
“While wages are expected to rise over the remainder of the year, persistently high inflation will put continued pressure on household budgets,” he said.
With discretionary spending already under strain, analysts fear that a fresh round of tax rises in the autumn could deepen the downturn for retailers and pile more pressure on household finances.
For Britain’s high street and consumer-facing companies, the combination of high inflation, weak confidence, and fiscal tightening has once again raised the spectre of a difficult winter.