England's World Cup victory has helped provide a boost to the economy, with pubs, retailers and consumers all poised to benefit despite signs that business confidence remains under pressure.
Investors backed hospitality stocks as football fans headed to pubs to celebrate the Three Lions' success, while a sharp fall in oil prices is feeding through to cheaper petrol, lower mortgage rates and easing concerns over the wider economic impact of the Iran conflict.
The improving backdrop has also calmed fears in Whitehall over the state of the public finances, with Treasury insiders increasingly confident the damage from the Middle East crisis will prove far smaller than initially feared.
World Cup winners
Shares in pub operators rose as investors anticipated packed venues and a spending boost from England's triumph.
Shares in Mitchells & Butlers, owner of All Bar One, O'Neill's and Nicholson's, climbed 2 per cent to 248p, while JD Wetherspoon gained 1 per cent to 706p.
Dan Coatsworth, head of markets at AJ Bell, said World Cup fever had provided pub operators with “a much-needed leg-up” as supporters flocked to watch England.
Retailers are also seeing the benefits.
Debenhams Group said football-inspired fashion sales at boohoo jumped 1,827 per cent between May and June, with searches for England increasing fivefold as supporters snapped up shirts and matchday outfits.
A company spokesperson said major sporting events “always create a real buzz” that spills over into shopping, adding that demand is expected to continue building as fans celebrate England's success.
Oil price relief
The biggest economic boost has come from energy markets.
Brent crude has fallen to around $71 a barrel after easing tensions in the Middle East, with oil exports recovering and fears over disruption to global supplies fading.
The decline has translated into significant savings for motorists.
According to the RAC, diesel prices fell by almost 17p a litre during June — the biggest monthly drop since 2000 — while petrol prices dropped by around 8p a litre.
Simon Williams, the RAC's head of policy, said June had been “a far better month for drivers” as lower oil prices filtered through to filling stations.
The cheaper energy outlook has also eased inflation concerns across financial markets.
Mortgage rates edge lower
Homeowners are beginning to see the benefits too.
The average two-year and five-year fixed mortgage rate has edged down to 5.51 per cent, according to Moneyfacts, extending a run of declines as investors scale back expectations for inflation following the fall in oil prices.
While borrowing costs remain above levels seen before the Iran conflict, the direction of travel is increasingly encouraging for prospective buyers and households coming to the end of fixed-rate deals.
Peter Stimson, director of mortgages at the lenderMPowered said: “Good news has been in short supply in the mortgage market for much of the year, but it’s finally making up for lost time. 2Mortgage interest rates have been ticking down in recent weeks and should fall further as the ‘peace dividend’ from the truce in the Gulf conflict pays out.
“Assuming the war’s inflationary whiplash fades in the coming weeks and months, swaps should continue to settle. There’s now a good chance that the Bank of England won’t need to increase its Base Rate at all this year, with some optimists even seeing a rate cut on the cards.”
Treasury breathing space
The improving outlook has also reduced pressure on the public finances.
Treasury insiders expect the economic hit from the Iran conflict to take only a modest bite out of the £23.6bn fiscal headroom built up by Chancellor Rachel Reeves, easing concerns that the next government will need immediate tax rises simply to repair the damage from higher energy prices.
Officials say the headroom was designed to absorb precisely this kind of external shock, with the recent decline in oil prices helping to improve the fiscal picture.
That could give expected incoming prime minister Andy Burnham greater flexibility ahead of his first Budget, although decisions on tax and spending will ultimately depend on updated forecasts from the Office for Budget Responsibility.
Confidence still subdued
The brighter picture for consumers contrasts with a more cautious mood among businesses.
The ICAEW's latest Business Confidence Monitor showed sentiment slipping to its lowest level since late 2022 as firms grappled with higher labour costs, elevated energy bills and continued geopolitical uncertainty.
Nearly two-thirds of companies said geopolitical risks had become a significant challenge, while concerns over transport costs also increased following disruption linked to the Iran conflict.
Financial markets also remained cautious over the outlook for US interest rates, although investors have reduced expectations of an immediate increase by the Federal Reserve.
For now, however, England's World Cup success has provided businesses with a welcome feel-good factor at a time when falling fuel costs and gradually easing mortgage rates are beginning to offer consumers some much-needed relief.
