U.K. Consumer Confidence Dives After Brexit Vote

LONDON—British consumer confidence suffered its steepest fall in more than two decades after voters decided to take the U.K. out of the European Union, an ominous sign that could foreshadow a broader economic slowdown.

A long-running barometer of consumer confidence published by market researchers GfK U.K. Ltd. recorded an 8-point fall in early July, the biggest monthly drop since 1994, according to results published on Friday. The index fell to minus 9, from minus 1 in June.

The survey of 2,002 people, conducted June 30 to July 5, is the first gauge of household sentiment published since the June 23 referendum. It suggests some consumers have been shaken by the political and market turmoil sparked by the vote—including a steep drop in the pound—and may rein in spending as uncertainty persists in the months ahead.

The Bank of England is bracing for such a slowdown. It eased regulatory restraints on banks to encourage lending on Tuesday, and Governor Mark Carney has telegraphed that interest-rate cuts are in the pipeline, possibly as soon as next week. Treasury chief George Osborne has abandoned his long-held goal of a budget surplus by 2020, and said corporate tax cuts may be needed to lure investment.

Economic uncertainty has been compounded by a political crisis. Prime Minister David Cameron said after the vote that he would resign, triggering a leadership contest in the governing Conservative Party that won’t be resolved until September. Negotiations with the EU over the terms of Britain’s withdrawal and outlining the shape of any new trading relationship with the bloc won’t begin until a new premier is in place.

U.K. Business Secretary Sajid Javid will hold preliminary trade talks with India on Friday, marking the country’s first steps towards securing new trade deals overseas following its vote to exit the EU. The get-together in Delhi is the first in a series of visits to potential trade partners in the coming months. Mr. Javid will also be visiting the U.S., China, Japan and South Korea, his department said.

Amid the uncertainty, GfK found widespread declines in consumer confidence among different age groups and regions. It also found sentiment deteriorated both among those who voted to remain in the EU and those who voted for Brexit, although the former group was gloomier than the latter.

Respondents said that, after the vote to exit the EU, they were more worried about their own financial situation, as well as the economy more broadly.

A measure that tracks consumers’ willingness to make major purchases, such as a house or vehicle, plummeted 12 points in early July compared with June, GfK said. A third of respondents said they expected prices to increase rapidly, up from around one in 10 a month earlier.

Joe Staton, head of market dynamics at GfK, said cutbacks in discretionary spending tend to hit sectors such as travel, fashion and groceries first. “We’ve seen a very significant drop in confidence,” he said.

Still, the gauge shows that, despite the post-referendum fall, consumers were more upbeat about the economy and their own financial prospects than they were during the long climb out of recession in 2008 and 2009. The index recorded a score lower than July’s in December 2013, and sank below minus 30 as recently as 2012.

Separately, a survey by the Recruitment Employment Confederation, which represents recruiters in the U.K, found hiring weakened in the run-up to the referendum. Chief Executive Kevin Green said it was too early to assess the effect of the Brexit vote on the jobs market but added companies believed that maintaining access to the EU’s single market for goods and services was critical to sustain hiring.

Write to Jason Douglas at jason.douglas[a]wsj.com