Consumer confidence fell by 1.1 percentage points during the final quarter of 2025 from -10% in Q3 2025 to -11.1%, according to the latest Deloitte Consumer Tracker. The fall in confidence, which is based on responses from 3,200 UK consumers aged 18+, was driven by a drop in five of the six measures included in the index.
The main drivers for the fall in the level of confidence in Q4 were a deterioration in perceptions of levels of debt (-2.6 percentage points), a fall in household disposable income (-1.4 percentage points), and general health and wellbeing (-1.4 percentage points). Sentiment around job security (-0.6 percentage points) and career progression (-0.9% percentage points) also contributed to the overall fall, albeit to a lesser extent.
Céline Fenech, consumer insight lead at Deloitte UK, said: “There’s still a lot of caution among consumers in the UK. While it is encouraging to see consumers’ views of the UK economy improving, likely boosted by the easing of interest rates and inflation, a broader improvement in confidence will require a more significant change in perceptions of affordability and job prospects. For now, consumers remain cautious about the economic outlook and, until they can be persuaded otherwise, will continue to hold off parting with their savings and hard-earned cash.”
Sentiment towards the economy swings back
There was a sign of optimism from UK consumers in the final quarter, with sentiment around the UK economy improving eight percentage points, up to -56% in Q4 from -64% in Q3. However, this was 4.4 percentage points down year-on-year.
Ian Stewart, chief economist at Deloitte UK, said: “Sentiment about economic prospects has increased markedly, with levels of uncertainty around taxes and public spending falling in the wake of November’s Budget. Inflation remains uncomfortably high but is likely to ease over coming months, paving the way for further, modest rate cuts. A lower inflation and interest rate environment should, in turn, help bolster consumer spirits.”
Spending continues on a downward trend
Consumer sentiment towards their overall personal expenditure fell in Q4 compared to both Q3 and the same point last year (-3.2 percentage points and -5.3 percentage points respectively).
Both essential and discretionary spending have also fallen year-on-year by 7.6 and 5.1 percentage points respectively. Despite capturing the festive shopping season, net spending was down across most essential and discretionary categories in Q4. This was a result of not just consumers spending less due to steadying inflation, but also due to a fall in sales volumes overall.
The data also shows wage growth is beginning to slow. Fewer consumers said that they saw an increase in their income compared to the last quarter (-2.2 percentage points), with this figure also down by 4.3 percentage points compared to the previous year.
Consumers have adapted to their circumstances, adopting defensive spending strategies to save cash where they can. Almost a third of people (30%) said that they had less money to spend, while over a quarter (27%) changed their usual spending habits and opted for different stores and brands to keep costs down. At the same time, nearly a third (31%) took advantage of loyalty cards and in-store discounts to keep costs down.
There is also an increased focus on seeking value among consumers. A quarter of consumers (25%) say that, despite the festive season, they only spent on essentials in Q4, with two fifths (39%) saying that they have been more frugal and careful with their spending.
Oliver Vernon-Harcourt, head of retail at Deloitte UK, said: “With wages down and prices remaining elevated, consumers are really feeling the squeeze. It’s no surprise that we’ve continued to see an uptick in people adopting defensive spending behaviours to make their budgets stretch further. Despite the festive period, consumers have demonstrated a real focus on value and greater frugality.
“An uptick in consumer confidence will depend on people feeling more encouraged to loosen their purse strings, so we can expect to see more retailers and restaurants using discounts and deals to entice spending in 2026.”
