KPMG UK recently released key updates that together paint a cautious picture for households and businesses: consumer confidence has weakened sharply, and KPMG’s chief economist warns inflation could re-accelerate if energy shocks persist. KPMG’s quarterly Consumer Pulse, based on an online survey of 3,000 UK adults conducted between March 5–16, found a marked deterioration in how people view the economy.
Six in ten respondents (62%) said the economy is getting worse — up from 58% in the prior quarter — while only around one in ten (10%) believe it is improving.
The survey highlights a shift toward greater caution among consumers as uncertainty mounts. kpmg.com
Rising everyday costs are central to that pessimism.
An overwhelming majority pointed to grocery prices (85%) and household utility bills (84%) as the primary reasons for their negative outlook.
Notably, concern about utilities jumped nine percentage points from the previous quarter, making it the top worry for people aged 25–54.
As a result, many households are already adapting their behavior: roughly half of those who think the economy is worsening report cutting back on spending, and 40% say they have postponed big-ticket purchases — an increase from 34% three months earlier.
Despite gloomy macro views, day-to-day spending shows resilience.
Price is now the leading factor shaping everyday buying decisions (71%), prompting consumers to rely more on loyalty schemes, own-brand products and lower-cost retailers.
Eating out and takeaway spending rose in the first quarter, and holidays remain the most common big-ticket purchase among those who spent.
Still, nearly half of respondents had not made a significant discretionary purchase so far in 2026, underscoring a cautious approach to larger spending decisions.
KPMG’s consumer team notes that while routine spending holds up, larger discretionary outlays are being prioritised for experiences and remain vulnerable to rising costs.
On inflation, Yael Selfin, KPMG UK’s Vice Chair and Chief Economist, cautioned that disruptions to energy supplies represent a near-term upside risk.
Official data showed inflation steady at 3.0% in February; KPMG expects it to ease modestly to about 2.5% in April.
However, Selfin warned that if energy supply problems continue, inflation could rebound later in the year and potentially peak below 4%.
Businesses already face higher energy costs and may pass those on to consumers, while households’ exposure will depend on how government support and billing cycles evolve.
Selfin also said the Bank of England faces a high bar to raise interest rates again: weakening labour market signals and broader economic softness should limit how entrenched inflation becomes.
If geopolitical tensions ease quickly, the Bank of England might keep rates unchanged through much of the first half of the year and consider beginning to ease policy around November.
Taken together, KPMG’s findings suggest a split picture: consumers are protecting day-to-day spending but trimming larger purchases as cost pressures rise, while economists warn that energy-driven inflation risks could complicate the recovery outlook for the rest of 2026.