In the lead-up to Chancellor Rachel Reeves’s spring statement, UK consumers are tightening their belts, with many reducing expenditures on daily essentials due to a decline in economic confidence, a KPMG survey reveals.
As Reeves readies to announce substantial cuts in welfare and government spending this Wednesday, the survey highlights a pervasive sentiment of economic pessimism across the UK.
Data gathered from 3,000 British consumers indicates that 58% perceive the economic conditions deteriorating over the last three months, marking a 15 percentage point increase from the previous quarter.
Despite a general sense of financial security among most respondents, the growing apprehension about the economy has prompted a significant number to curb their spending and alter their consumption habits. Around 43% of those surveyed are spending less on routine items, over a third are increasing their savings as a precaution, and 29% are postponing the acquisition of major purchases.
The UK economy has seen stagnation over the past six months, compounded by a notable dip in both business and consumer confidence. This downturn coincides with global uncertainties, such as Donald Trump’s ongoing trade wars, and domestically, Labour’s emphasis on tax increases and spending reductions has been criticised for exacerbating economic woes.
January saw the UK economy contract by 0.1%, a surprising downturn that sets a challenging backdrop for Reeves’s imminent fiscal plans. The Office for Budget Responsibility is poised to slash its growth forecast for 2025 by half in its forthcoming report, reflecting the heightened economic uncertainty.
The KPMG study also found an increase in financial insecurity among Britons, with those feeling precarious about their personal finances rising from 21% to 24%. Of these, 15% are reducing non-essential spending to manage basic living costs, and 2% are accumulating debt to cover their bills.
Despite these challenges, the government points to recent improvements in real wage growth and the Bank of England’s rate cuts—thrice since last summer—as positive signs that might help households recover from the strains of high inflation.
Linda Ellett, KPMG UK’s head of consumer, retail and leisure, noted that even financially secure families are pruning their budgets in anticipation of rising costs, such as new mortgage deals or increased travel expenses. She emphasized the importance of this week’s spring statement in bolstering public confidence about the UK’s economic future.
