UK Consumer Spending Slump Threatens Economic Growth Amid Gloomy Outlook
British consumers continued to tighten their financial belts in January, with economists warning that persistently sluggish spending could create a sustained drag on economic growth throughout the first quarter of 2026. The latest Consumer Sentiment Index from S&P Global recorded a reading of 44.8, indicating further deterioration in household confidence across the United Kingdom.
While the figure showed a marginal improvement from January's 44.6, it remains significantly below the 50.0 neutral threshold and represents one of the weakest readings observed over the past two years. This persistent pessimism among households coincides with a sharp decline in appetite for major purchases, which has fallen to its lowest level in ten months.
Economic Warning Signs Multiply
Maryam Balunch, economist at S&P Global Market Intelligence, noted that the mood among UK households mirrors the dismal weather patterns experienced across the country this year. "A period of prolonged rain and a distinct lack of sunshine have undoubtedly failed to lift the low spirits observed among households," Balunch stated. "However, there are more substantial factors at play here than simply unfavorable weather conditions."
Balunch emphasized that the current low appetite for consumer spending "bodes ill" for broader economic prospects and strongly suggests a "sustained drag on economic growth from sluggish consumer spending in the first quarter." This warning comes as households report a significant downturn in savings accumulation, further constraining their spending capacity.
Growth Figures Paint Concerning Picture
The growth concerns follow disappointing economic figures that concluded 2025 on a weak note. Despite expectations of a post-Budget rebound in the services sector—which contributes approximately 80 percent to the UK's Gross Domestic Product—this anticipated recovery failed to materialize significantly.
Economic growth during the fourth quarter of 2025 registered at a sluggish 0.1 percent, slightly below the 0.2 percent forecast by analysts. More concerningly, GDP per head—a crucial indicator of individual living standards—contracted by 0.1 percent for the second consecutive quarter, signaling a clear deterioration in personal economic conditions. This contraction occurred despite the figure being 0.6 percent higher than the same quarter in the previous year.
Andrew Sentance, former policymaker at the Bank of England, offered a stark assessment, suggesting the UK appears headed toward "the most dismal decade for growth in 100 years" based on current trajectories.
Debt Accumulation Accelerates
S&P Global's data also revealed alarming trends in household debt accumulation, which has reached its fastest pace since July 2025. Young adults aged 18-24 are experiencing the steepest increases in debt burdens, highlighting particular financial pressures on this demographic.
Simultaneously, British consumers have expressed stronger interest in unsecured credit—loans not backed by collateral—even as the availability of such loans has shrunk at the most rapid pace witnessed in eighteen months. Balunch noted that households are becoming "increasingly worried" about their debt levels, creating additional psychological barriers to spending.
Every region across the United Kingdom registered declines in current financial health assessments, with the East Midlands experiencing the most severe reduction. London reported the softest decline among regions, though still negative overall. This geographical consistency underscores the nationwide nature of the consumer confidence crisis.
The convergence of weak consumer sentiment, declining spending appetite, accelerating debt accumulation, and disappointing growth figures creates a challenging economic environment as the UK enters 2026. Economists will closely monitor whether policy interventions or seasonal improvements can reverse these concerning trends in the coming months.
