Consumers are cutting back spending on everyday items amid falling confidence in the UK economy before Rachel Reeves’s spring statement, according to a survey.
As the chancellor prepares to confirm billions of pounds in cuts to welfare and government spending on Wednesday, the research by KPMG showed growing numbers of people in Britain believed the economy was heading in the wrong direction.
The survey of 3,000 UK consumers found 58% felt Britain’s economy was worsening in the three months to the end of February, an increase of 15 percentage points from the three months to the end of November.
Although most people reported feeling financially secure, the growing negative economic perception led more consumers to respond by cutting their spending and changing their buying habits.
As many as 43% of consumers said they were reducing their spending on everyday items, while more than a third reported saving more as a contingency, and 29% said they were deferring the purchase of big-ticket items.
Britain’s economy has stagnated in the past half-year amid a sharp fall in business and consumer confidence. Alongside an uncertain global outlook amid Donald Trump’s trade wars, experts have warned that Labour’s gloomy rhetoric and focus on tax rises and spending cuts have taken a toll.
Official figures showed the economy unexpectedly shrank by 0.1% in January, in a setback to Reeves before the spring statement. The Office for Budget Responsibility, the independent Treasury watchdog, is expected to halve its 2025 growth forecast for Britain when it publishes its updated estimates on Wednesday.
According to the KPMG survey, the number of people feeling insecure about their personal finances grew from 21% to 24%. Within that, 15% of people said they were having to cut discretionary spending to pay for essentials, while 2% said they were incurring debt to pay bills.
The government has highlighted recent strength in real wage growth, helping households to rebuild the damage to their finances from high inflation, as well as the Bank of England cutting interest rates three times since the summer.
Linda Ellett, the head of consumer, retail and leisure at KPMG UK, said growing nervousness about the economy was leading some households to cut their spending even if they were currently in a secure financial position.
She said: “Some may be taking this action as they prepare for higher costs, such as a new mortgage deal or the higher cost of travel. But other cautious consumers are certainly preparing for the potential impact on them from what they believe to be a worsening economy.
“This week’s spring statement needs to give people the confidence in the longer-term UK economic outlook.”
