Consumers will start 2026 in a downbeat mood amid continued concern about the economy and the cost of living.
Discretionary spending is likely to remain under pressure as a result, KPMG’s consumer pulse research indicated.
While 56% of consumers feel financially secure, 58% think the UK economy is getting worse – up from 43% at the start of 2025 – and half of those say they are cutting discretionary spend. Concerns cited included the price of food and utility bills.
Only 13% of consumers reported that their discretionary spending will be higher in 2026 than in 2025, and 42% of consumers plan no big-ticket purchases in the first quarter.
Those who are planning to spend are prioritising holidays, which is also what consumers would be most likely to put their money towards if they had more discretionary spending power.
Nevertheless, 14% said they planned minor home improvements and 10% intended to spend on major home improvements, furniture and home appliances.
KPMG head of consumer, retail and leisure Linda Ellett 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.
“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 the remaining share of the available consumer spend will be fierce, with an ever-sharpening focus on business models, efficiencies and profit margin.”
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