The Deloitte Consumer Tracker Q1 2025
UK consumer confidence remains unchanged for the second consecutive quarter
The latest Deloitte Consumer Tracker shows that UK consumer confidence was relatively flat for the second consecutive quarter at -7.8% in Q1 2025 compared with -8.1 % in Q4 2024.
Key findings Q1 2025
- Consumer confidence remains flat: The Deloitte Consumer Confidence index showed no improvement in Q1 2025, indicating continued nervousness among consumers about the UK economy.
- Economic concerns outweigh positive factors: Despite real wage growth and low unemployment, consumer spending remains subdued due to economic and geopolitical uncertainty.
- Inflation impacts spending habits: Although inflation has fallen from its peak in 2022, consumers continue to compare prices to pre-pandemic levels, leading to tactical spending and a focus on essential purchases.
- Discretionary spending declines, except for travel: Consumers are cutting back on non-essential spending, with the exception of travel, which remains a priority.
- Day-to-day spending increases driven by inflation: Spending on essential items has risen to its highest level, largely attributed to the impact of inflation on prices.
- The outlook depends on economic stability: Consumer demand is expected to remain subdued in the short term, with potential for improvement if economic conditions stabilise.
The lack of improvement in the Deloitte Consumer Confidence Index in Q1 2025 points to consumers remaining nervous. The measure of confidence in the UK economy, which is separate from the main index, dropped to its lowest level in a year. However, at -8.1% in Q1 2025, the index remains above its long-term average of -10.7%.
The Deloitte Consumer Confidence Index averages the net percentage improvement in confidence levels over the past three months for six individual measures. In Q1, only three out of the six measures in the index rose compared with the previous quarter. Coinciding with a time of year when consumers focus more on their health, there was a four-percentage-point rise in consumers’ views on their general health and wellbeing. Even when combined with marginal increases in confidence around job security and children’s welfare, these improvements did not offset the falling sentiment in the other three measures tracked in our survey. While there was a marginal fall in sentiment around job opportunities, there was a two percentage point fall in sentiment around debt and a one percentage point drop in confidence in household disposable income.
Despite economic conditions that favour consumers, including real wage growth and low unemployment by historical standards, consumer spending remains subdued. Overall, there is a continued lag between improving consumer finances and their propensity to spend more. Not only are consumers nervous in the face of economic and geopolitical uncertainty, they also continue to compare today’s higher prices to pre-pandemic levels, despite inflation falling from its highs in late 2022. As a result, consumers remain tactical about spending. They have not stopped spending, but are spending differently, prioritising essential purchases.
Consumers in our survey reported decreased levels of spending in all discretionary categories but one: spending on travel remains the exception as consumers ring-fence their holiday budgets. The data shows that overall net spending on discretionary goods and services dropped four percentage points as consumers cut down to cope with the higher costs of food and energy. When asked, 58% of consumers agreed that they have been more careful with their overall spending in the first three months of 2025, and 54% say they have consciously cut down on luxuries or treats. Consumers’ net spending on day-to-day categories rose in Q1 to its highest level in our survey’s history. Among consumers who spent more, there was a seven percentage point increase in the proportion who blamed higher prices, in a sign of inflationary pressure on budgets.
Despite strong real income growth over the past two years, consumers will want to see what happens next to the cost of financing their debts, their ability to save, the prices of essential items and their job security. There are also some concerns that persistent inflation this year could further dampen consumer confidence and put more downward pressure on consumer spending in the more discretionary categories. In summary, consumer demand could remain subdued for some time while the economic environment hopefully settles this year.
Net % improvement in confidence in the last three months
Net % spending more in the last three months by category
Source: The Deloitte Consumer Tracker
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Consumer spending on essentials such as food reached a record high but came at the expense of discretionary goods and services. Our data shows consumers are cutting back on luxuries and non-essential items and to continue to attract a share of consumer wallets, companies are urged to focus on cost management, product innovation and strategic pricing.
ONS retail sales showed signs of recovery in Q1, following a fall in household consumption in late 2024. Faced with increased costs retailers will be considering strategies like improved cost management and renegotiations with suppliers to combat inflationary pressures without passing excessive costs to consumers. The unfolding consumer landscape hinges on the inflation environment and its impact on essential spending categories. Confidence stalling rather than collapsing and better weather will offer some hope of a more sustained recovery.
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Net % improvement in confidence in the last three months
Source: The Deloitte Consumer Tracker
Net % spending more in the last three months by category
Source: The Deloitte Consumer Tracker
Net % spending more in the last three months by category
Source: The Deloitte Consumer Tracker
Net % spending more in the last three months by category
Source: The Deloitte Consumer Tracker
