UK Consumer Confidence Plummets: KPMG Report

Consumer Discretionary

9 days agoPWG Publications

UK Consumer Confidence Hits a New Low: KPMG Warns of Economic Uncertainty

As the UK navigates through a complex economic landscape, KPMG's latest findings suggest that consumer confidence is experiencing a significant downturn. Despite earlier optimism about personal financial security, a growing majority of consumers are now expressing fear over the state of the economy. This shift in sentiment raises important questions about the future of consumer spending and the overall health of the UK economy.

Understanding Consumer Confidence

Consumer confidence is a crucial indicator of economic health, reflecting how optimistic consumers feel about their financial situation and the economy's future. Recent surveys by KPMG have highlighted a concerning trend: while the majority of households feel financially secure, there is a rising pessimism about the broader economic outlook.

KPMG's Consumer Pulse survey revealed that nearly three times more people felt financially secure (57%) than insecure (21%) at the end of 2024. However, this optimism does not extend to their view of the economy, with four in ten consumers believing it is worsening compared to a quarter who see it improving[1][2]. This disconnect between personal financial security and economic outlook is particularly evident among older adults, with two-thirds of those aged 65 and over expressing pessimism about the economy's direction[3].

Economic Outlook: Factors Affecting Consumer Sentiment

Several factors are contributing to the growing unease among UK consumers:

Economic Growth: Expected to be 1.1% in 2025, economic growth is positive but modest, which may not be enough to boost consumer confidence significantly[4].
Inflation and Interest Rates: The stability of inflation and the potential for modest cuts in interest rates could influence consumer behavior, but these are not substantial enough to offset concerns about job security and economic stability[4].
Job Market: The tightening job market has seen the biggest contraction in vacancies since 2020, alongside declining hiring intentions, further exacerbating consumer anxiety[4].

Spending Intentions and Consumer Behavior

Despite the gloomy economic outlook, a significant portion of consumers still plan to make major purchases in 2025, with holidays being the most popular choice (39%). Additionally, one-fifth are planning minor home improvements, while one-tenth intend to buy a new car or a mobile phone[1][3]. However, there is a growing trend towards cost-conscious behavior:

Discounted Purchases: A quarter of consumers reported buying more promotional or discounted items over the last few months[3].
Saving Strategies: Many consumers are targeting savings by switching insurance providers and other financial strategies[1][3].

Key Consumer Spending Trends

Price Sensitivity: Price remains a top driver for purchasing decisions, both for everyday and big-ticket items[1][3].
Promotional Spending: Retailers are expected to leverage AI and personalized offers to encourage more spending, especially during promotional periods like Black Friday[3][4].

The Impact of Economic Perception on Spending

The perception of a worsening economy is leading even financially secure consumers to adopt cautious spending habits:

Reduced Spending: 43% of consumers are reducing everyday expenses due to economic concerns[5].
Deferred Purchases: Many are putting off big-ticket purchases as a precautionary measure[5].

Economic Uncertainty and Consumer Cautiousness

Savings as Contingency: More consumers are saving money to prepare for potential economic downturns[5].
Nervousness About Job Security: The contracting job market and declining hiring intentions increase nervousness about future financial stability[4][5].

Conclusion

KPMG's findings paint a complex picture of UK consumer confidence, where personal financial security contrasts sharply with broader economic concerns. As the economy faces challenges like inflation and job market uncertainty, retailers must adapt by offering personalized promotions and embracing digital commerce to encourage spending. The future of consumer spending will depend significantly on how effectively economic and financial policies address these concerns.

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