KPMG UK has recently noted that a relatively cautious consumer landscape is now expected to continue into upcoming year. KPMG’s Consumer Pulse survey measures the overall consumer confidence as the current year finally comes to an end and 2026 begins.
KPMG UK Q4 2025 Consumer Pulse highlights and research findings:
- 56% of consumers continue to feel financially secure – only down 1% from the start of 2025.
- 58% of people think the UK economy is getting worse – up from 43% when 2025 began.
- Half (49%) of those thinking the economy is worsening say they are cutting discretionary spend.
- Only 13% of consumers say their discretionary spending will be higher in 2026 than in 2025.
- 42% of consumers plan no big ticket spending in Q1 2026, but 25% plan to spend toward a holiday.
- If consumers had more discretionary budget in 2026, most (32%) would put it toward holiday cost.
The 2026 challenge for the consumer economy is made “clear in new research from KPMG UK, which highlights that despite the majority of people continuing to feel financially secure, a combination of concern about the economy, household essential cost pressures, and discretionary spending caution will continue to limit overall spending.”
The findings come from KPMG UK’s latest Consumer Pulse survey, which asked 3000 UK consumers “about their spending in Q4 2025 and their intention for Q1 2026 and beyond.”
Q4 2025 financial and economic confidence:
Despite almost no change in how households “feel about their own finances throughout the past year, 2005 saw a steep decline in sentiment towards the economy.”
Entering 2026, the majority of people (56%) feel “secure in their personal finances – falling by only 1% from 57% when 2025 began.”
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% (albeit improving from 62% in Q3).”
This downbeat opinion from the majority of consumers “continues to impact spending – with consumers that feel the economy is worsening taking contingency action,” including:
- Half (49%) saying they are cutting discretionary spend (down from 56% in Q3).
- 36% saying they are saving more (down from 58% in Q3).
- 34% saying they are deferring big ticket purchases (down from 38% in Q3).
- A fifth (20%) less inclined to leave their current job (up from 19% in Q3)
- The cost of groceries (81%), utilities (75%), and eating or drinking out (53%) are the three most common reasons that people feel that the economy is worsening.
With consumers aged 65 or over most likely “to say that the UK economy is getting worse (at 70%), and those aged 35 to 44 most likely (at 24%) to say it’s improving.”
2026 spending confidence:
Reflecting on what their current feeling of financial security means for their discretionary spending plans in 2026, among all 3000 consumers polled:
- 47% plan to spend the SAME on things they want in 2026 than in 2025.
- 27% plan to spend LESS on things they want in 2026 than in 2025.
- 13% plan to spend MORE on things they want in 2026 than in 2025.
- While 13% are not sure.
Linda Ellett, Head of Consumer, Retail and Leisure for KPMG UK, said:
“It is good news that the majority of consumers feel financially secure and there are welcome signs of targeted discretionary spending plans. But a landscape of consumers adjusting to higher household essential outgoings and spending caution due to perception of a worsening economy is set to continue into 2026.
They added:
“Annual consumer spending growth looks set to sluggish again, with available discretionary budget prioritised – particularly for the likes of holidays and home improvements. Competition among consumer businesses for remaining share of the available consumer spend will be fierce, with an ever-sharpening focus on business models, efficiencies and profit margin.”
Q1 2026 spending intention:
- 42% of consumers say they will buy no big-ticket items in the first quarter of 2026.
- Among those planning to spend, putting money toward a holiday is the most common (25%) plan – and is also the thing that consumers would be most likely to put their money toward if they had more discretionary spending power during 2026.
The increasing use of AI by consumers was “one of the key themes of 2025 and looks set to grow further in 2026.”
A fifth (19%) of consumers say they “will use AI to track prices, and also product search, making these the two AI uses they are most open to engaging with when shopping in 2026.”
There are also signs of growth for social commerce, with “one in ten (10%) consumers saying they will use social media more to discover new products or services than in 2025.”
The circular economy also looks set for a boost, with a “fifth of consumers (21%) saying they are likely to buy more second-hand goods in 2026 than last year – rising to a third (31%) among 18- to 24-year-olds.”
Linda Ellett added:
“The growth of AI searching and social commerce looks set to continue in 2026, with consumers, particularly of younger age groups, becoming accustomed to finding products this way and businesses having to adapt their respective marketing strategies.”