UK consumer spending in 2026: what the data shows

UK consumer spending has proved more resilient than the confidence data would predict. Aggregate retail sales volumes have not collapsed despite GfK confidence at -23 and Deloitte's consumer tracker at multi-year lows. The reason is not that consumers are in better shape than the surveys suggest. The reason is credit. Households are borrowing to sustain spending that their incomes alone cannot support, and that distinction changes the outlook considerably.

What the retail data shows

ONS retail sales data through early 2026 shows a consumer base that is cautious but not collapsing. Volume growth has been subdued, and there has been consistent trading down within categories: consumers switching from branded to own-label in grocery, from restaurants to home cooking, from premium to mid-market in clothing. But aggregate retail sales volumes have not fallen sharply, which presents an apparent contradiction with the deeply negative consumer confidence readings.

The explanation for that contradiction is credit. The Bank of England's consumer credit data shows six consecutive quarters of above-trend growth in credit card balances and personal loan approvals. Households are, in aggregate, borrowing to sustain a level of consumption that their real incomes alone cannot support. This is a pattern that is sustainable until it is not, and the signals that it is approaching its limits are accumulating.

Consumer credit: the mechanism and the risk

Consumer credit growth becomes a problem when one of three things happens: when credit availability tightens, when debt service costs rise to a level that crowds out consumption, or when an income shock forces households to prioritise debt repayment over new spending. The UK consumer credit position is exposed to all three. The underlying causes of the cost and credit pressures households are carrying are covered in our note on what caused the UK cost of living crisis.

Interest rates, while coming down from their post-2022 peak, remain elevated by the standards of the 2010s. Households that took on credit card debt or personal loans at 2023-2025 rates are carrying a higher debt service burden than the pre-pandemic norm. Credit card delinquency rates (the share of balances where repayment has fallen behind) have been rising from their post-pandemic lows, which signals that the margin of household financial resilience is thinner than the aggregate spending data implies.

The Barclays consumer spending tracker, which monitors actual card transaction data, has shown consistent signs of spending caution in discretionary categories through 2025. Hospitality and leisure spending has been declining in volume terms even while holding up nominally, which means price increases are masking falling transaction volumes. This is a precursor pattern to outright nominal spending decline once price increases moderate.

Which categories are under pressure

The categories experiencing the most significant volume pressure are those where purchases can be deferred without immediate consequence. Home furnishings and improvement, consumer electronics, clothing beyond essentials, and high-value leisure categories including international travel within certain price brackets are all seeing volume declines. These are categories where a consumer who is cautious but not in distress chooses to wait, and where a consumer approaching financial stress cuts first.

Grocery retail is holding volume but experiencing significant trading down. The shift from branded to own-label is well-documented and accelerating. Grocery retailers with strong own-label ranges and value positioning, including Aldi, Lidl, and the major supermarkets' own-label portfolios, are taking share from premium-positioned products across multiple categories. This is a structural change in consumer behaviour that is unlikely to reverse fully even when household finances improve.

Food service (restaurants, cafés, and takeaways) is under pressure from two directions: the cost-of-living squeeze on discretionary spending, and the significant increase in employer National Insurance contributions from April 2025, which has raised the cost base of labour-intensive hospitality businesses at a point when consumer willingness to pay higher prices is limited.

What the forward indicators suggest

The Deloitte Consumer Tracker disposable income sentiment component fell sharply in Q1 2026. That component leads actual spending behaviour by one to two quarters, which points to a spending contraction in Q2-Q3 2026 that has not yet fully materialised in the retail data. The GfK purchase intentions index, specifically the major purchase component, is at a level consistent with significant deferral of big-ticket items.

The base case is continued gradual deterioration in discretionary spending volumes, with essentials holding up and trading down continuing across most categories. A sharper consumer spending contraction triggered by employment deterioration, a credit availability tightening, or an external shock is materially more probable in 2026 than it was in 2024. The Bank of England's rate-cutting cycle is the main force working against that contraction; the pace and extent of those cuts is covered in our note on whether UK interest rates are going down.

What this means for consumer-facing businesses

For businesses with significant UK consumer revenue exposure, the planning assumption that matters is not the aggregate retail sales figure but the credit-dependence of your specific customer base. Businesses whose customers are more likely to be carrying elevated consumer credit balances, particularly those serving middle-income households in non-essential categories, face a non-linear risk. That customer base is fine until it is not, and the transition is faster than gradual adjustment.

The practical response is to stress-test revenue assumptions against a contraction of 10-15 percent in discretionary spending volumes over a twelve-month period. Not because that is the most likely outcome, but because current conditions make it a plausible one, and the cost of being unprepared for a plausible outcome exceeds the cost of the planning.

The CPIx tracks wages, credit, retail demand, savings, and energy costs in one composite score, updated every 30 minutes. It is the fastest available read on whether the credit-financed spending described here is holding or starting to crack. The Briefed daily briefing covers the economic releases that move it. Free, weekdays at 6:45am.