Consumer confidence declined by three percentage points during the first quarter of 2026 to reach its lowest level since Q3 2023, according to the latest Deloitte Consumer Tracker. The fall in confidence, based on responses from 3,200 UK consumers aged 18+, was also the biggest quarterly drop since Q1 2022. Overall confidence was also down 6.3 percentage points year-on-year.
Five of the six index measures fell this quarter, most significantly in sentiment towards levels of household disposable income (down 7.2 percentage points from Q4 2025 and 9.5 percentage points year-on-year). This also marked its largest decline since Q1 2022. A decrease in sentiment towards job security also contributed to the fall in overall confidence, down 2.1 percentage points on the previous quarter and 6.2 percentage points year-on-year.
Meanwhile, consumer sentiment about the state of the UK economy, separate from the main index, decreased by 13.5 percentage points in Q1, representing the biggest drop since Q4 2024 and a return to levels last seen in Q4 2022.
Céline Fenech, consumer insight lead at Deloitte UK, said: “The impact of recent geopolitical events on the price of energy will likely feel like another setback for consumers. Many were already facing a squeeze on their household budgets at the start of the year with the slowing of wage growth and a cooling jobs market.
“With the prospect of another increase in the price of essentials, consumer confidence continues to be tested and is trending downwards to levels last seen four years ago. For consumer sentiment and spending to improve, households will want to see a more certain outlook for the economy.”
Discretionary spending reaches three year low
Consumer spending on discretionary items fell by a significant 6.7 percentage points compared with the previous quarter to reach its lowest level since Q1 2023. This also marked a similar 6.6 percentage point decline year-on-year, in a sign that the drop off in spending is not just due to seasonality.
This was driven by a fall in spending across all non-essential categories, namely on clothing and footwear (down 11 percentage points on Q4 2025, and 10 percentage points year-on-year) and alcoholic beverages and tobacco (down 15 percentage points on Q4 2025 , and 7.7 percentage points year-on-year). The year-on-year decline was also significant across bigger ticket items, especially for major household appliances (down 4 percentage points) and electrical equipment (down 7 percentage points).
Almost a third of consumers (29%) agree that they are only spending on essentials, up from a quarter (25%) in Q4 2025. At the same time, of those consumers who say they spent less, half (50%) attribute this to spending on fewer items in an effort to save money (up from 44%).
There was also an increase in the number of consumers reporting being more careful with their money, with nearly half (45%) saying they are being more frugal with their overall spending (up from 39% the previous quarter). Similarly, there was a five percentage point increase in consumers consciously cutting down on any luxuries or treats (37%).
Of those consumers who said they spent more in the last three months, there was a near nine percentage point increase in those attributing this to prices going up (79%, up from 70% in Q4 2025).
Long holidays (up 3.2 percentage points) and short holidays (up 2 percentage points) were the only two leisure categories that showed a meaningful increase in consumer spending in Q1. However, when asked about their spending intentions for the next three months, consumers said they intend to spend more on leisure activities such as eating out (+10.7 percentage points) and drinking in pubs (+11 percentage points).
Oliver Vernon-Harcourt, head of retail at Deloitte UK, said: “While there is typically a drop off in spending in January after the busy festive shopping period, the fall seen in Q1 is more representative of a conscious cutting back on non-essentials by consumers. At the same time, essential spending remains high, with consumers allocating most of their budget to everyday items that are particularly vulnerable to inflation.
“Big ticket purchases remain on the back burner, with fewer people planning to buy a car, a house or even a major appliance or piece of furniture compared to a year ago. These are all signs that consumers continue to wait for improved economic conditions before making major purchases. This means the long awaited rebound in consumer spending might take more time.”
