Consumer confidence falls as energy cost concern rises

Confidence in the UK economy has declined as rising household utility costs become a primary concern for consumers, according to data from KPMG.

The quarterly Consumer Pulse survey of 3,000 people conducted in March found 62% of respondents believe the economy is worsening. This is an increase from 58% in the previous quarter.

Only one in 10 respondents said the economy is improving. Among those who view the outlook as negative, 85% cited grocery costs as the leading factor. Concerns regarding utility costs also rose nine percentage points to 84% during the quarter. This was the top reason cited by consumers aged 25 to 54.

Almost half of those who believe the economy is worsening have reduced their spending. 40% have deferred large purchases, up from 34% three months ago.

Despite the economic outlook, 54% of consumers reported feeling secure in their personal financial situation. This is a slight decrease from 56% in the previous period.

Those feeling financially insecure rose to 25%. If the economy were to improve, 28% of respondents said they would increase discretionary spending. Price remains the primary driver for everyday purchases for 71% of consumers. This is the highest level recorded in 12 months.

Shoppers reported an increased use of loyalty schemes and value brands. However, day-to-day spending on eating out and takeaways remained resilient during the first quarter.

The most common large expenditure was on holidays, reported by 22% of those polled. Conversely, 47% of consumers have not made a major purchase in 2026.

Head of consumer, retail and leisure for KPMG UK Linda Ellett said: “Considering the backdrop of the ongoing conflict in the Middle East, and the actual and potential impact on energy and grocery prices, it is not a surprise that we are seeing heightened consumer concern about the economic health of the UK.

“While there are relatively healthy signs of day to day spending activity so far this year, a growing number of people say they are deferring larger item spending due to their concern about the economy. The number of people feeling insecure about their financial situation has slightly grown in the last quarter, but the majority of people currently remain secure. That scale of security may be tested in the coming months, depending on how much costs increase by and for how long.”

Ellett added: “The cautious consumer landscape continues, with essential cost levels and economic concern driving an increased focus on price and promotions. Loyalty scheme use and own brand buying continues to grow. Larger discretionary spend is being prioritised toward holidays and experiences, but there are still relatively healthy signs so far this year of day-to-day spending activity – albeit consumer, retail and leisure brands are having to compete in a landscape of squeezed consumer budgets and rising business costs.”