Fuel sales collapse as Iran war costs knock savings | Money News

A growing number of UK households are dipping into savings as rising costs linked to the US-Iran war pile pressure on family budgets, according to a closely-watched survey as official figures chart a collapse in fuel sales.

GfK’s consumer confidence index suggested that caution, especially over major purchases, was taking hold while it noted a leap in the number of consumers digging in to their savings accounts to pay for day-to-day expenses.

Its measure of major purchase intentions dropped to its lowest since January 2025.

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The report was released as official retail sales figures came in worse than expected for the month of April as the effects of front-loading the previous month, at the start of the Middle East conflict, were erased.

ONS chief economist Grant Fitzner said: “Retail sales increased in the three months to April with strong and sustained sales for beauty product stores as well as computer and tech shops.

“After strong growth last month, motor fuel sales fell in April, with evidence suggesting motorists were conserving fuel after stocking up in March.

“These subdued fuel purchases contributed to a sizeable monthly fall for total retail sales in April.”

Retail sales volumes in April were 1.3% lower than in March, the ONS said.

Economists polled by the Reuters news agency had expected a decline less than half that figure.

Fuel prices rose sharply in early March as oil and natural gas flows through the Strait of Hormuz waterway were halted.

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‘Largest energy crisis in history’

Unleaded costs hit wartime highs this week, according to data from motoring groups, though diesel prices are continuing to edge down slowly.

It is widely expected that an energy-driven surge in inflation is expected as the summer progresses however, with Brent crude oil prices currently still 70% higher in the year to date.

Recent forecasts have suggested that even if the US and Iran were to achieve peace tomorrow, and shipments of oil, gas and refined products were to resume through the strait, UK businesses and households would still face elevated bills over the coming winter.

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Cinemas, concerts and meals out… what has the chancellor cut VAT on?

The energy regulator is due to reveal next week the price cap covering July-September. A 13% increase is expected on the current level.

The chancellor revealed a series of measures this week to help families afford some fun over the summer and has scrapped planned fuel duty hikes this year.

Talk of a proposed voluntary scheme to cut some supermarket costs in return for price caps sparked an industry backlash, with Ms Reeves instead reducing tariffs on dozens of products in the hope chains pass on those reductions.

There is no news yet on any targeted energy bill support.

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Supermarket fury over price caps

Harvir Dhillon, economist at the British Retail Consortium, warned: “Discretionary spend is likely to drop further as the cost of living squeeze worsens.

“To protect consumers and support economic growth in the months ahead, Government should avoid further inflationary pressures through domestic policy costs.

“It can start by cutting non-commodity energy charges, which include the taxes and levies that account for two thirds of retailers’ energy bills, and addressing the triple packaging tax that affects all retailers and their supply chains.”