Household confidence has slumped in the run-up to the Budget as consumers worry about job security, energy prices and rising interest rates.

Figures from financial firm S&P Global suggest early optimism surrounding Andy Burnham taking over as Prime Minister has quickly faded.

The monthly consumer sentiment index, a poll of 1,500 households, edged down to a three-month low, pointing to ‘notable strain on financial confidence' across the UK.

Further gloom is likely to come at next month’s Budget as economists predict Chancellor John Healey will put up taxes to repair Britain’s deteriorating public finances.

Maryam Baluch, economist at S&P Global Market Intelligence, said a ‘downbeat mood’ was spreading among households ‘as improved sentiment surrounding the new government is eroded by renewed worries over energy prices, the cost of living and job prospects’.

Baluch said job insecurity was at its highest for more than three and a half years ‘highlighting a growing disconnect between rising economic growth and perceptions of employment security’.

The findings come at a time when recent official figures show a contrast between robust economic growth and a dismal jobs picture – with 200,000 jobs having been axed since Labour took power.

Baluch added that fears of rising interest rates ‘have become more entrenched, adding to concerns about household finances’. Markets are betting there will be four rate hikes by the end of next year, starting in November.

It came as separate figures from supermarket Asda’s income tracker showed pressures intensifying as rising costs eat into household budgets.

The tracker showed growth in spending power – money left over after paying essentials and household bills – was at its weakest in six months.

Pushpin Singh, managing economist at the Centre for Economics and Business Research, which produces the tracker, said: ‘Inflation remains the primary risk to household spending power.

‘Rising essential costs and the prospect of higher interest rates could place further pressure on discretionary incomes in the months ahead.’

Britain’s cost of living squeeze centres on a surge in oil and gas prices caused by Donald Trump’s Iran war. With little sign of an end to the conflict, the squeeze looks set to deepen over coming months.

Household energy tariffs will next week jump to their highest level in three years and the Bank of England predicts a further 24pc increase in January, deepening the pain.

Petrol and diesel costs have been surging too while food price inflation is expected to intensify over coming months. 

Last week the Bank signalled that interest rate rises are likely if the Middle East war continues to drive inflation higher.

In anticipation of hikes, lenders have already been withdrawing their best deals, with the average rate on a five-year fixed term loan now at 5.92pc, the highest since October 2023, according to latest Moneyfacts data.