More than a third (39%) of UK consumers say they are being frugal, and a quarter (25%) are spending only on essentials, despite growing hopes for the country’s economy.
Consumer confidence fell by 1.1 points in the final quarter of 2025 to –11.1%, reaching its lowest ebb in two years of reporting by Deloitte’s Consumer Tracker.
Five of the tracker’s six measures fell, including consumers’ confidence about their own debt levels (–2.6 percentage points), falling disposable income (–1.4ppts), health and wellbeing (–1.4ppts), job security (–0.6ppts) and career progression (–0.9ppts).
Consumers felt they had tightened their belts significantly, with year-on-year perceived drops in essential and discretionary spend of 7.6% and 5.1% respectively.
Nearly a third (31%) took advantage of loyalty cards and in-store discounts to keep costs down.
Inflation rose for the first time in five months in December, hitting 3.4% as transport, alcohol and tobacco pushed prices higher.
Deloitte UK head of retail Oliver Vernon-Harcourt 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.”
But bucking the trend with a rise of eight points in the quarter – from –64% in Q3 to –56% – was consumers’ confidence for the UK economy’s prospects.
Deloitte UK chief economist Ian Stewart 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.”
Consumer insight lead Céline Fenech added that there was still plenty of caution among consumers, with 32% cutting down on luxuries or treats.
“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.”
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