Article last updated 30 September 2025.
We are all dead tired of talking about backstops and customs unions and voting blocs, but Brexit chat still manages to get centre stage. But what would we be talking about – if only the worst sitcom drama ever aired by the BBC hadn’t happened? In the background, many of the ingredients for an economic upswing have accumulated in the wings without many investors really noticing.
Retailers had a miserable time of it in 2018 and consumer confidence surveys remained firmly in the basement. But retail sales growth has actually been ticking along ok – it’s the more substantial purchases, like homes, and the small luxuries, like eating out and buying jewellery and new clothes, which appear to being hit hardest. In the past, this tends to happen when Brits are feeling the pinch: when unemployment is rising and wages are stagnating or inflation is sending pay packets backwards in real terms. But today – strange as it sounds – the labour market is actually very strong. Employment is at record levels, skills shortages abound, wage growth of 3.4% is the fastest pace in a decade and inflation has tapered off to 2.1%, down from 3% in January. The Asda discretionary income tracker, which calculates the average amount left in household accounts after taxes and bills, rocketed 5.8% in the year to December.
So what are we all doing with this extra cash? Economic smoke signals suggest we’re paying off debts, particularly credit cards and other small loans. The amount of cash on deposit in the UK has spiked in the past few months. That’s not like us at all! This is a good thing in the long run, no doubt about it. UK households, on the whole, are debt junkies. Getting rid of some of those loans will make us more secure for the future – which seems to be the point. Putting this together with consumer confidence levels at six-year lows, Brits are acting like they are worried about their jobs.
Our take on all this? It wouldn’t take much for this uncharacteristic restraint to disappear, should the politicians get their act together and agree on a future for the country. That could lead to consumers hitting the shops once more and potentially encourage businesses to invest again after years of shelving plans in the UK and spending offshore instead.
Alexandra Jackson,
Fund Manager
Rathbone UK Opportunities Fund