Cost of dwelling squeeze tightens and enterprise confidence falls in blow to Starmer’s financial ‘reset’

Sir Keir Starmer’s economic ‘reset’ has been dealt a blow by a further squeeze on the cost of living and weak business confidence, according to figures.

The Prime Minister said yesterday ‘what matters more than anything is the cost of living’ and this year Britain would be ‘turning a corner’.

But a retail sector report showed food price rises accelerated last month, putting more pressure on households – and warned of continued inflation pain in 2026, much of it thanks to Labour’s policies.

Meanwhile, Bank of England data revealed hard-pressed families pushed consumer credit to a two-year high of £2.1billion in November as they turned to borrowing to pay for festivities.

In a further blow, a poll for the Institute of Directors (IoD) showed business confidence was near record lows last month, with hiring and investment slashed.

And another survey, from the Jobs Foundation, showed nearly four in five family business owners are dejected about the economy – with many believing times are tougher than in the 1970s.

Focus: The Prime Minister Sir Keir Starmer (pictured) said that ‘what matters more than anything else is the cost of living’

It came as the Prime Minister desperately tried to shore up his authority and fend off a revolt from his own party amid dismal poll ratings. He claimed voters would ‘begin to feel the difference in their pockets, in the ability to pay the bill’ in 2026.

Yet figures from the British Retail Consortium (BRC) showed shop price inflation climbed from 0.6 per cent to 0.7 per cent in December, with food inflation rising from 3 per cent to 3.3 per cent.

It was partly blamed on firms grappling with a sharp rise in the minimum wage and an employer National Insurance raid that took effect last year, as well as new workers’ rights and botched business rates reform.

BRC chief executive Helen Dickinson said retailers were trying to keep prices down but that ‘increased public policy costs and regulation will likely keep inflation sticky’.

Meanwhile the IoD’s survey of more than 500 business leaders across the UK revealed that the Budget had done little to boost confidence, which ticked up only slightly from record lows seen late last year.

IoD chief economist Anna Leach said: ‘The December improvement still leaves confidence around the record lows reached in the first lockdown, and after the last two Budgets.

‘Hiring freezes remain widespread, amidst concern over further cost increases in the latest Budget and the direction of the Employment Rights Bill.’

Bosses said confidence could be restored with lower taxes and reform to workers’ rights laws.

Tory business spokesman Andrew Griffith said the ‘double whammy’ of the tax-raising Budget and employment bill meant the IoD findings were no surprise. 

He added: ‘If the Prime Minister is serious about growth, listening to bosses on scaling back tax hikes and cutting employment red tape would be top of his new year resolutions.’