UK consumers remain cautious about spending as they enter 2026, despite feeling financially secure, according to a recent survey by KPMG. The survey reveals a complex interplay of economic concerns and household cost pressures that are holding back spending. Consumers are still grappling with the aftermath of high food and energy costs, which have been exacerbated by years of soaring inflation. This has left them with a limited appetite for discretionary spending.
The report highlights a concerning shift in consumer sentiment. While a majority (56%) feel secure in their personal finances, a significant increase in concerns about the UK economy has been observed. In 2025, 43% of respondents believed the economy was worsening, and by the end of the year, this number had risen to 58%. This growing pessimism is particularly notable among older consumers, with those aged 65 or over being the most pessimistic about the economy's health.
The inflationary period between January 2021 and May 2024 saw a cumulative CPI increase of 23%, and while inflation has slowed to 3.2% in November, it remains a significant concern. The Bank of England's recent interest rate cut from 4% to 3.75% is expected to boost confidence, but the survey suggests that the perception of a worsening economy will persist into 2026.
The Chancellor, Rachel Reeves, faces criticism for delaying the budget to November, which has been accused of increasing uncertainty and dampening consumer confidence. However, the Treasury argues that higher incomes are helping to offset inflation and boost growth. The government's budget measures, including increases in the national living and minimum wage, energy bill relief, and frozen rail fares, aim to support consumer spending and improve living standards.
Despite these efforts, the survey indicates that consumer confidence is still fragile, and the road to economic recovery may be longer than anticipated.
