Rising grocery prices remain the biggest drag on consumer confidence as the UK heads into 2026, with shoppers prioritising value, promotions and own-label ranges despite most households still feeling financially secure, according to new research from KPMG UK.
KPMG’s latest Consumer Pulse survey shows that 56 per cent of consumers say they feel financially secure, only marginally down on the start of 2025. However, concern about the wider economy has intensified, with 58 per cent believing it is getting worse, up from 43 per cent at the beginning of the year. The cost of groceries is the single biggest factor driving that pessimism, cited by 81 per cent of respondents who feel the economy is deteriorating.
The cautious mood is feeding directly into spending behaviour. Nearly half (49%) of those worried about the economy say they are cutting discretionary spending, while more than a third are saving more or deferring big-ticket purchases. Only 13 per cent of consumers expect their discretionary spending to increase in 2026, with 27 per cent planning to spend less and almost half expecting to spend about the same as in 2025.
For grocery retailers, the data underlines an ongoing shift towards value-led shopping missions. Over the past three months, 32 per cent of shoppers reported spending more on groceries, but this has gone hand-in-hand with trading down: 23 per cent bought more promotional or discounted items, 20 per cent increased purchases of own-label or value products, and 19 per cent shopped more often at lower-cost retailers. Price remains the dominant purchasing driver for everyday items, cited by 66 per cent of consumers, well ahead of quality (50%) and convenience (28%).
KPMG’s findings also point to further pressure on non-essential food and drink categories. Spending on eating out and takeaways fell for around a third of consumers in Q4 2025, while grocery inflation continues to shape perceptions of household affordability alongside utilities and other essentials.
Looking ahead to the first quarter of 2026, 42 per cent of consumers say they will not buy any big-ticket items. Among those planning to spend, holidays top the list rather than retail goods, suggesting limited relief for discretionary categories. If shoppers had more spending power next year, almost a third say they would put it towards holidays, while fewer would prioritise clothing or eating out.
However, there are signs of longer-term behavioural shifts that grocery retailers will need to navigate. A fifth of consumers say they plan to buy more second-hand goods in 2026, rising to nearly a third among 18- to 24-year-olds, while 19 per cent expect to use AI tools such as price trackers or chatbots to help them shop. Loyalty schemes are also growing in importance, with 22 per cent saying they have used them more recently to secure lower prices.
Commenting on the research, Linda Ellett, head of consumer, retail and leisure at KPMG UK, said the pressure on household budgets is set to persist. “It is good news that the majority of consumers feel financially secure and there are welcome signs of targeted discretionary spending plans. But a landscape of consumers adjusting to higher household essential outgoings and spending caution due to perception of a worsening economy is set to continue into 2026,” she said.
“Annual consumer spending growth looks set to be sluggish again, with available discretionary budget prioritised – particularly for the likes of holidays and home improvements. Competition among consumer businesses for remaining share of the available consumer spend will be fierce, with an ever-sharpening focus on business models, efficiencies and profit margin.”
For grocery retailers, value, sharp pricing, compelling promotions and strong own-label ranges will remain critical as shoppers continue to feel the pinch at the checkout well into 2026.