UK consumer sentiment rises but feel good factor could fade away as Golden Quarter approaches
PwC research shows improving household finances and lower inflation expectations sparking a UK consumer confidence rebound at a five-year high. Its survey recorded an index score of +1 in August, after a sharp fall in April to –13 as fears over the cost-of-living gripped consumers as conflict continued in the Middle East.
Now, after the hottest UK summer on record, the index score has reversed that decline and is now two points higher than in January, continuing the upward trend since the start of last year. Sentiment saw an increase across all age groups, with 35 to 44-year-olds in particular seeing their sentiment reach its highest ever recorded level of +21. Sentiment among over 65s also rebounded to its highest level since the removal of winter fuel allowance was announced in autumn 2024, overtaking both the 54 to 65 and 45 to 54 age groups.
The findings show perceived household finances are at the strongest they have been in the last four years, improving across every demographic. 39% of those surveyed describing their financial situation as 'healthy' - i.e. that they have money left over at the end of the month for luxuries or savings - up from 27% in September 2022. At the other end of the spectrum, among the least affluent ‘E2’ socioeconomic group, the proportion of those either struggling to pay bills or having missed bill payments altogether has fallen from 28% to 12% over the same period.
This combined with a period of real earnings growth, falling food inflation, and lower consumer inflation expectations have contributed to consumers feeling more buoyant. The findings also show that fewer consumers plan to make short-term spending cutbacks than in the spring. 68% plan to make some kind of spending cutback in the next three months, compared with 78% in April.
However, the growth in confidence is still tempered by worries about the cost of living, with 85% of consumers citing this as one of their top concerns alongside the UK economy (86%). While both figures are down from April, they are roughly at the same level as they were at start of the year. Consumers’ levels of concern are largely unchanged from January, with the environment and global warming being the only issue to become more pressing - 75% of consumers cite this as a concern, up from 71% at the start of the year, in the wake of recent heatwaves.
Concerns amongst different demographic groups show a more nuanced picture. For young people, 61% of 18 to 24 year-olds say they're worried about job prospects or job security, up from 54% in January. Amongst those aged 25 to 34, concerns around mortgage repayments or rent increases rose from 52% to 62% over the same period.
Sam Waller, Leader of Industry for Consumer Markets at PwC UK, says: "The World Cup and the heatwave have helped spur a welcome uplift in consumer sentiment. But our survey shows consumer caution hasn't gone away. Cost of living pressures remain, and for some are an increasing concern."
"As we head into autumn, the pressure on household finances will increase as energy and food prices rise. This will impact consumer facing businesses – along with wider macroeconomic headwinds that could spell higher interest rates and possible tax rises. Businesses should incentivise customers to start Christmas shopping now, and at the same, they must prepare themselves for a slowdown in consumer demand, look for ways to optimise operating costs, and to get their back of house in order."
At the time of the survey in mid-August, 14% of consumers polled said that they had already started their Christmas shopping. A further 16% said that they planned to do most of their Christmas shopping earlier than usual, even though they had not started yet, compared with only 4% saying they would make most of their festive purchases later.
Meanwhile, for the first time since the end of the pandemic, more consumers said that they expected to spend more this year on Christmas shopping and celebrations rather than less. Some 25% thought they would spend more in the run up to this Christmas - up from 22% a year ago - compared with only 21% expecting to spend less - down from 26% in September 2025.
For those intending to spend more this year, the top reason was that it is ‘important to keep Christmas special' (cited by 33%), while 32% said it was because they had saved up throughout the year. For those who plan to spend less on Christmas this year, the rising cost of living (73%) was their number one reason.
Jacqueline Windsor, Head of Retail at PwC UK, says: "For retailers, Christmas needs to come early. Consumer sentiment has hit positive territory for the first time since the pandemic, and some people have already started festive shopping. It's a golden period of consumer confidence that may have come too early for the Golden Quarter. We expect food and fuel inflation to bite in the autumn, and added uncertainty as the new Chancellor assesses if any tax changes may be needed in the upcoming budget. Retailers would do well to strike early with Christmas before purse strings tighten."
2026 RTIH Innovation Awards
UK retail will be a key focus area at the 2026 RTIH Innovation Awards.
The awards are now open for entries and celebrate global retail technology innovation in a fast moving omnichannel world.
Our winners will be revealed at the 2026 RTIH Innovation Awards Ceremony, taking place at The HAC in Central London on Wednesday, 4th November.
Check out our 2025 winners here.
Our 2025 hall of fame entrants were revealed during a sold out event which took place at The HAC on 16th October and consisted of a drinks reception, three course meal, and awards ceremony presided over by award winning comedian, actress and writer Tiff Stevenson.
In his welcome speech, Scott Thompson, Founder and Editor, RTIH, said: “This is the awards’ fifth year as a physical event. We started off with just 30 people at the South Place Hotel not far from here, then moved to London Bridge Hotel, then The Barbican, and last year RIBA’s HQ in the West End.”
“But I’m conscious of the fact that, to quote the legend that is Taylor Swift, You’re only as hot as your last hit, baby. So, this year we’ve moved to our biggest venue yet, and also pulled in our largest number of entries to date and broken attendance records.”
He added: “This year’s submissions have without doubt been our best yet. To quote one of the judges: The examples of innovative developments across both traditional and digital retail spaces were truly remarkable.”
Congratulations to our winners, and a big thank you to our sponsors, judging panel, the legend that is Tiff Stevenson, and all those who attended our 2025 gathering.
