UK Consumer Spending to Remain Weak in 2026 as Job Worries Rise -Fitch
UK real consumer spending will continue to lag behind eurozone peers in 2026, even though the UK inflation outlook has improved, Fitch Ratings forecasts. The global ratings agency stated that growing worries about job prospects will keep consumers cautious.
It highlighted that growth in real consumer spending per capita in the UK has been weaker than in eurozone peers due mainly to the impact of more persistent inflation on real incomes.
In 2026, the UK inflation outlook is more benign, but rising unemployment will still restrain consumers, Fitch said, noting that real consumer spending per capita in the UK has flatlined since 2022 and remains below its end-2019 level.
“Although strong net immigration during this period has weighed on UK per-capita spending, aggregate consumer spending is also weaker than in eurozone peers”.
According to Fitch, Spain experienced similarly rapid population growth to the UK, but its aggregate real consumer spending is 6.1% above the end-2019 level, versus only 1% in the UK.
The report expressed that this divergence does not appear to reflect greater consumer pessimism or weaker nominal income growth in the UK.
Headline consumer confidence measures in the UK and Spain have moved similarly, and nominal disposable income has risen by more than 30% in both countries since 2019.
The key constraint on UK real consumer spending has been the longer period of high inflation. The post-Covid-19 inflation surge lasted longer in the UK than in Spain, slowing the recovery in UK real disposable incomes and leaving real spending growth more lacklustre.
Fitch forecasts the inflation outlook to be more benign this year and for the Bank of England to respond with three rate cuts in 2026, to 3%.
While this would be positive for consumer spending, households’ concerns about a weakening labour market are likely to offset these positives and Fitch forecasts another weak year for consumer spending.
