Source: Sharecast
The accountancy firm’s latest Consumer Pulse survey found 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 survey asked 3,000 UK consumers about their spending in the final quarter of 2025 and their intentions for the first quarter of next year and beyond.
KPMG found that 56% of consumers continue to feel financially secure - only down 1% from the start of 2025. Meanwhile, 58% think the UK economy is getting worse, up from 43% when 2025 began.
The survey found that 49% of those thinking the economy is worsening say they are cutting discretionary spend, while only 13% of consumers say their discretionary spending will be higher in 2026 than in 2025.
According to the survey, 42% of consumers plan no big ticket spending in the first quarter of 2026, but 25% plan to spend on a holiday. If consumers had more discretionary budget in 2026, 32% would put it towards holiday costs.
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.
"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."
