UK retailers face another year of cautious consumers, shifting loyalties and fast-evolving digital habits in 2026, according to new analysis from RSM UK.
Jacqui Baker, head of retail at the firm, says fragile consumer confidence will continue to weigh on spending decisions, despite easing inflation and the prospect of further interest rate cuts. While the recent Budget avoided a “killer blow” to confidence, it also failed to provide a meaningful incentive to spend, with almost 60 per cent of consumers planning to save more or maintain current saving levels over the next three months.
“With most tax rises backloaded to the end of the decade, it’s likely consumers will be muddling through the continued cycle of uncertainty next year which doesn’t bode well for the sector,” Baker says. High household saving rates remain a drag on retail growth, although lower inflation and falling interest rates could eventually help unlock some discretionary spend.
One area bucking the trend is health and beauty, as the so-called “lipstick effect” gathers pace. Around 10 per cent of consumers plan to increase spending in the category over the next three months, double the level seen last year. Among Gen Z, the effect is even more pronounced, with 19 per cent planning to spend more on health and beauty, compared with 8 per cent a year ago.
“With economic growth likely to remain subdued [this] year, we expect to see more consumers opting for smaller luxuries as they look to treat themselves without breaking the bank,” Baker says.
Social media is also set to play an even bigger role in shaping purchasing decisions. Younger consumers are increasingly discovering products through platforms such as TikTok and Instagram rather than search engines, while one in three Gen Z shoppers turn to social media after purchase for styling and usage inspiration. Despite this, online shopping more broadly remains dominant for younger cohorts, with two-thirds of Gen Z shopping mostly or almost entirely online and mobiles emerging as the preferred device.
“Mobiles can act as a gateway into stores, whether to check availability, redeem loyalty points or make payments,” Baker notes. “Retailers ought to tap into this opportunity, but that starts with having a seamless customer journey between online and instore.”
Brand loyalty is also under pressure as shoppers embrace experimentation. Just 28 per cent of Gen Z consumers consider themselves loyal to brands, while a third prefer to mix familiar names with new or trendy options, and a quarter actively seek out new brands.
At the same time, budget loyalists, younger and the most financially constrained, tend to stick to trusted brands given their price sensitivity.
“Retailers must focus on continually re-winning loyalty through relevance, authenticity and innovation. The use of artificial intelligence will be key here to flex their approach depending on the consumer and their needs,” Baker suggests.
Sustainability remains important, but Baker highlights a growing tension between values and value. Older, more financially secure consumers continue to prioritise sustainability, while younger shoppers often compromise due to cost or convenience pressures. This has fuelled the rise of ultra-fast fashion and boosted demand for pre-loved clothing, prompting high street brands to showcase second-hand collections in store.
“There is still plenty of scope for retailers to go further,” Baker adds, pointing to opportunities around recycled fabrics and more efficient supply chains. In health and beauty in particular, sustainability is becoming integral to product appeal, as consumers in the category place greater emphasis on ethical and environmental credentials.
Taken together, the themes point to a retail landscape in 2026 defined by caution, creativity and constant adaptation, as businesses balance tight consumer budgets with rapidly changing expectations.