Ó×Å®ÊÓƵ

As we move further into 2026, consumer-facing businesses are at the forefront of a rapidly changing economic landscape. Elevated costs, ongoing geopolitical uncertainty, and sustained inflationary pressures are reshaping how UK consumers think, plan and spend.

Our Consumer Outlook provides a clear view of how consumer sentiment is shifting in response to todayÓ×Å®ÊÓƵ™s challenging economic environment. We analyse how individuals are adapting their spending behaviours, and what these changes mean for businesses and the broader UK economy.

Our latest insight on consumer markets

Designed for consumer market leaders, our featured insight cuts through the noise to focus on whatÓ×Å®ÊÓƵ™s truly shaping your world today.

Previous energy shocks show that consumers tend to react slowly to the initial crisis, often maintaining spending by cutting back on saving at first. The real pull back in consumer demand usually comes later, lasting far longer than many anticipate. For example, after RussiaÓ×Å®ÊÓƵ™s invasion of Ukraine sparked the 2022 energy crisis, it took nearly two years for consumer confidence to bounce back.

Our latest research reveals a similar pattern is emerging. Since the conflict in the Middle East escalated in February, the proportion of consumers expecting to draw down on savings over the next three months has increased by 4% in April. At the same time, the share of consumers planning to save at their normal rate has fallen by 7%, and those intending to save more has remained unchanged at 16% for three consecutive months. Together, this suggests households are becoming less inclined to save as financial pressures begin to build.

In April, inflation stood at 2.8%, while petrol prices rose 20% between February and April. Despite this, household budgets have, so far, absorbed most of the shock, as consumers reported that 22% of their income was left over after essential expenses in April, only a slight dip from 23% before tensions with Iran intensified. These figures suggest that, for now, the impact of rising costs is being felt gradually, rather than dramatically.

However, the squeeze is far more pronounced among families, one of the consumer groups with the greatest spending power. For this cohort, disposable income after essentials fell from 27% to 23% over the same period. Families drive volume across the consumer-led economy, from holidays and clothing to dining out and special occasions. When families come under pressure, the ripple effects are felt throughout the wider marketplace, amplifying the challenges for consumer-facing businesses.

ItÓ×Å®ÊÓƵ™s not just the immediate impact of the conflict in the Middle East that is weighing on consumer sentiment. The future outlook for household finances is also becoming more fragile, raising the risk that consumers pull back spending into the second half of the year.

In February, 40% of consumers expected to have more money in three monthsÓ×Å®ÊÓƵ™ time, but this fell to 35% by April. At the same time, the proportion expecting to have less money increased by 6%, highlighting a clear deterioration in confidence around future finances.

The sharpest shift in sentiment has come from more affluent consumers. Among those earning £80k and over, the proportion expecting to have less money in three months more than tripled to 13% in April. Optimism also weakened significantly, with the share expecting to have more money in three monthsÓ×Å®ÊÓƵ™ time, falling by 20% to 60%. This suggests higher-income households will be more reluctant to part with cash, and businesses will need to work harder to capture spend from this group than they might have in the past.

Travel has emerged as the first clear casualty of the conflict in the Middle East, with our survey revealing 31% of consumers have already changed their travel plans as a direct result of the current situation, either by cancelling, postponing, or changing destinations. Notably, destinations like Dubai are seeing reduced demand due to heightened geopolitical tensions and safety concerns.

The impact extends beyond international travel, as 27% of consumers now say they have no plans to take a holiday in the next year, compared to 19% before the conflict in the Middle East began.

This slowdown is evident across both domestic and international travel categories. Self-organised overseas trips have seen the sharpest decline, down 8% in April compared with February, followed by cruise and adventure holidays, both down 6%. UK holidays and resort breaks have also weakened, falling by 5% over the same period. This shift in consumer behaviour is creating a mixed picture for the travel industry.

Domestically, the hotels market is already showing signs of strain, with London occupancy softening as disruption to international tourism weighs on inbound travel. In contrast, staycations are seeing a modest uplift in interest, rising by 2% overall and by 4% among families as consumers seek greater certainty and value closer to home. However, any uplift in domestic demand is unlikely to offset the loss of overseas visitors.

Pressure is building across the airline industry, where already tight margins are coming under further strain following the closure of the Strait of Hormuz, which has seen jet fuel prices double since February. Whilst some operators are absorbing costs to preserve demand, others are increasing fares and raising ancillary charges such as baggage and seat selection fees to protect margins.

Input cost pressures are a reality in the year ahead, no matter the outcome of the conflict. This means a sustained increase to the cost of international travel with consumers responding accordingly. Affluent consumers will likely prioritise travel and dial down spending on goods, whilst other consumers may stay closer to home, or cancel travel plans altogether.

Amid this disruption, businesses must stay agile and responsive to shifting consumer preferences or risk being left behind.

Outlook for UK consumer businesses

The consumer environment is set to become increasingly challenging, with rising energy costs and further inflationary pressures yet to fully feed through to household finances. This suggests that consumers will become more value-driven in the months ahead, prioritising essential spending and seeking ways to stretch their disposable income.

The slowdown in the travel market has broader implications for the consumer economy. For apparel retailers, weaker demand for holidays increases the risk of subdued seasonal spending and excess stock. For hospitality, some operators may benefit as consumers redirect spending towards other experience-led activities, but demand is likely to remain uneven.

Consumer businesses should anticipate greater sensitivity to price, increased trading down, and a heightened focus on affordability. Relying solely on price competitiveness will not be enough.

Customers will expect value to be delivered in different ways, whether through loyalty rewards, targeted promotions, flexible payment options or experiences that feel worth the spend. The businesses best placed to navigate this environment will be those that closely monitor changing consumer behaviours and maintain disciplined cost management as input pressures build.

Across the consumer landscape, agility and responsiveness are more important than ever. Businesses will need to be prepared to pivot quickly as spending patterns evolve, both during and after periods of disruption. The lasting impact of the conflict in the Middle East will not only affect immediate consumer confidence and behaviour, but will also shape longer-term trends.

Explore our related consumer markets news articles

Trending consumer markets insights