One in Five UK Consumers May Use Savings

One in five British consumers may draw on savings to cover rising everyday expenses. Consumer activity remains resilient, but most of the second-quarter increase in spending came from higher transaction values rather than a sharp rise in the number of purchases.

British Households Consider Using Savings

UK consumers are increasingly treating savings as a potential source of money for groceries, utilities, transport and other essential costs. As Bloomberg reported, some households are preparing to use reserves accumulated earlier to absorb pressure on their budgets.

The findings measure intentions rather than confirmed withdrawals across the population. They show how consumers expect to respond if costs rise further but do not establish how much money has already been taken out of savings accounts.

One in five respondents said they might use savings if higher fuel, travel, energy and other costs placed additional pressure on household finances. Around 6% expected to borrow more. Among people aged 18 to 24, the share considering additional borrowing reached 18%.

Six in Ten Expect the Economy to Worsen

The KPMG Consumer Pulse report combines a June survey of 3,000 UK adults with anonymised transaction information from 154,218 users of the Snoop financial application during April, May and June.

About 60% of respondents believed the UK economy was worsening, nine percentage points more than in June 2025. Twelve percent saw an improvement, while 21% thought conditions were broadly unchanged.

Among those who believed the economy was deteriorating, 82% cited grocery prices, 79% pointed to household utilities, and 59% identified the cost of eating and drinking out. Higher rent or mortgage costs were mentioned by 19%, while 14% were concerned about job security.

Half of consumers were seeking to reduce their monthly expenditure. About four in ten planned to save more as a contingency, and a similar share intended to defer large purchases.

The intention of some households to save more and others to use existing balances reflects differences in financial circumstances. Some consumers can still build emergency reserves, while others are already finding that current income does not cover their expenses.

Consumers Cut Clothing and Dining Expenses

Thirty-nine percent of respondents reported reducing spending on restaurants and cafés. Takeaway food was cut by 33%, clothing and footwear by 31%, and drinking out by 28%. Groceries were reduced by 23%, while 22% spent less on live entertainment.

Survey responses and transaction data nevertheless present different pictures. Consumers report cutting back, but monetary spending in several of those categories continues to rise.

Spending in pubs and bars was 17% higher than a year earlier, while restaurant expenditure increased 3%. Grocery spending rose 4%, and live-entertainment spending advanced 2%. Spending on takeaway food, clothing and footwear was broadly unchanged.

Higher prices, changes in average transaction values and differences between households help explain the gap. Fewer restaurant visits do not necessarily produce lower expenditure if each meal costs more.

Higher Transaction Values Drive Spending Growth

Total spending across the categories covered by KPMG increased 6.8% year on year in the second quarter of 2026. Average spending per transaction rose 4.4%, while transactions per customer increased 1.6%.

Most of the monetary growth therefore came from the value of each purchase rather than a sharp increase in shopping activity. The figures are nominal, are not adjusted for inflation and relate to the study sample rather than all UK household consumption.

Entertainment and leisure spending increased 8.9%, while non-grocery retail grew 8.3%. Health and beauty expenditure advanced 8.8%.

Travel and holiday spending rose only 1.5%, while expenditure in restaurants, cafés, pubs and other out-of-home venues increased 3.6%. Fashion spending fell 0.5% as customer numbers and transaction frequency declined, partly offset by a higher average purchase value.

Essential Bills Take a Larger Share of Income

Household-bill spending increased 9.3% in the second quarter. Finance and insurance expenditure rose 7.7%, while grocery spending gained 3.9%.

Higher essential costs reduce the income available for leisure, major purchases and savings. Total consumer spending can rise even when living standards do not improve because households are paying more for goods and services that are difficult to avoid.

Price remains the most important consideration in everyday shopping. Consumers also focus on quality, convenience and discounts. Around 22% said they had used retailer loyalty programmes more frequently to obtain lower prices.

About one-third reported selling an item through a resale platform during 2026, reflecting both the popularity of second-hand commerce and attempts to generate additional income.

Financial Positions Vary Widely

Eleven percent of respondents described themselves as financially confident and able to spend freely. A further 37% said they were comfortable with everyday spending but needed to plan larger purchases.

Around 32% managed discretionary expenditure through monthly budgeting. Fifteen percent had to limit non-essential purchases to cover basic costs, while 3% were unable to pay essential bills or were accumulating debt.

Almost half of respondents therefore viewed their finances as confident or comfortable. For 18%, however, the cost of living was already forcing cuts to discretionary spending, creating difficulty with bills or increasing debt.

UK Saving Ratio Falls to 8.9 Percent

The UK Office for National Statistics said the household saving ratio fell by 0.7 percentage points to 8.9% in the first quarter of 2026. The decline was driven by lower non-pension saving.

The saving ratio measures the share of aggregate disposable household resources remaining after consumption, including adjustments for pension entitlements. It does not mean that every family saves 8.9% of its income.

Real household disposable income per person, which adjusts after-tax income for inflation, fell 0.8% during the quarter. Consumption continued to expand, indicating that households collectively saved a smaller share of their income or used reserves accumulated earlier.

The aggregate ratio does not show how savings are distributed. Large balances held by one group can coexist with little or no emergency reserve among lower-income households.

Retail Sales Rise at the Start of Summer

The volume of retail sales in Great Britain increased 1% in June from May and 4.2% from a year earlier, according to the latest official retail sales release.

Sales volumes rose 0.6% in the second quarter compared with the first three months of 2026 and were 2.8% higher than a year earlier. Unlike monetary spending, this measure estimates the quantity of goods purchased.

Warm weather and sales promotions supported activity in May and June. Consumers bought more clothing, sporting merchandise, fans, air-conditioning equipment and outdoor products.

Clothing-store sales increased 1.9% in June, the largest monthly rise since September 2025. Online spending values rose 2.8%, while internet purchases increased their share of total retail sales from 28.9% to 29.4%, the highest since April 2021.

The figures confirm that UK consumption has not entered a broad contraction. Weather, promotions and seasonal demand may, however, have provided only temporary support.

UK Inflation Slows to 2.6 Percent

Annual consumer price inflation eased to 2.6% in June from 2.8% in May, according to the official inflation release. The rate remained above the Bank of England’s 2% target.

Food and non-alcoholic beverage prices increased 1.7% from a year earlier. Restaurant and hotel prices rose 4.4%, transport costs increased 5.7%, and clothing and footwear prices fell 0.5%. Services inflation stood at 3.6%.

Slower headline inflation does not mean that pressure on household finances has disappeared. The overall price level remains considerably higher than several years ago, while transport and many essential services continue to rise faster than the headline index.

Bank of England Expects Inflation to Rise Again

The Bank of England’s July Monetary Policy Report projected that inflation would rise to about 3.2% in the fourth quarter of 2026. The main risk is that higher global energy prices pass through to fuel, electricity, heating and other goods.

The central bank kept its benchmark interest rate at 3.75%. Elevated borrowing costs continue to affect mortgages, consumer credit and business spending.

The Bank estimated second-quarter consumption growth at about 0.3%, down from 0.6% in the first quarter. The second-quarter number is a forecast rather than an official outturn.

Higher inflation and subdued wage growth may restrict real incomes during the coming months. Households can temporarily absorb the pressure by saving less, drawing down existing balances or borrowing more.

As International Investment experts report, the UK consumer market remains resilient, but households’ capacity to maintain spending varies widely. Total expenditure is rising mainly because each transaction costs more, while essential bills are taking a larger share of income. Savings can temporarily support retail and services, but they cannot replace sustained growth in real earnings. If inflation accelerates again, families without substantial reserves will have to reduce consumption more sharply or take on additional debt.

FAQ: UK Household Savings

How many British consumers may use savings?

One in five survey respondents said they might withdraw money from a savings account if costs increased further. The study measures intentions and does not show that all of those consumers have already started spending their savings.

Why are households considering using savings?

The main pressures include groceries, utilities, transport, eating out and borrowing costs. Higher essential expenses leave less income for discretionary purchases.

What does an 8.9 percent saving ratio mean?

It is the aggregate share of household disposable resources left after consumption, including pension adjustments. It does not show the position of an individual family or how savings are distributed.

Is UK consumer spending declining?

A broad contraction has not been recorded. Retail sales volumes increased 0.6% in the second quarter. However, monetary expenditure is growing faster than transaction numbers, and part of the increase reflects higher prices.

Which expenses are consumers cutting first?

The clearest signs of caution are in clothing, dining out, takeaway food, travel, entertainment and major purchases.