UK consumers are reluctant to spend going into 2026 despite feeling almost as secure about their personal finances as they did at the beginning of the year, according to research.
A study by the accountancy multinational KPMG found that concerns about the health of the UK economy were holding consumers back from spending, especially on eating out and big ticket items such as cars and furniture.
The firm said its latest consumer pulse survey, which asked 3,000 people about their spending in the fourth quarter of 2025 and their intentions for the first three months of 2026, showed “a combination of concern about the economy and household cost pressures” would continue to limit overall spending.
Consumers said they were still coping with the high cost of food and energy after several years of soaring inflation. The survey found they had little appetite for spending on discretionary items.
“Entering 2026, the majority of people (56%) feel secure in their personal finances – falling by only 1% from 57% when 2025 began,” the report said. “But concern about the health of the UK economy grew during 2025, starting the year with 43% saying that the economy is worsening and ending the year at 58%.”
Inflation, as measured by the consumer prices index (CPI), slowed to 3.2% in November, down from 3.8% in September. However, in the peak inflationary period between January 2021 and May 2024, the cumulative increase in the CPI was 23%.
Opposition parties have accused Rachel Reeves of increasing uncertainty and dampening consumer confidence by delaying the budget to November. The chancellor came under fire for a series of leaks and Treasury briefings that triggered speculation about extra taxes, threatening the wealth and incomes of higher earners and retirees.
KPMG said respondents to its survey aged 65 or over were the most likely to be pessimistic about the health of the economy. It said an above average number of older respondents were concerned to keep a lid on spending in the new year.
Younger respondents said they were more optimistic, with almost twice the proportion of those aged 35 to 44 years old saying the economy was improving (24%) as the average (13%).
The survey will disappoint Reeves, who is relying on a rebound in consumer confidence after the budget to boost economic growth.
The recent interest rate cut by the Bank of England from 4% to 3.75% is expected to boost business and consumer confidence along with falling inflation and the expectation of more stable public finances.
There was some cheer for the chancellor from survey readings showing an improvement in sentiment from the third quarter to the fourth, indicating a turnaround in the outlook for consumers since the budget, but KPMG said the “perception of a worsening economy is set to continue into 2026”.
An HM Treasury spokesperson said higher incomes were helping to offset inflation and boost growth. “Real wages are up more in the first year of this government than the first decade under the previous government and living standards are higher than they were in the previous parliament meaning people have more money to go out and spend,” they said.
“In the budget we increased the national living wage and national minimum wage and took £150 off people’s energy bills, extended the freeze on prescription fees, fuel duty and froze rail fares for the first time in 30 years.”
