From Domestic Pressure to Global Shock: How the cost-of-living crisis is evolving
Since 2020, we have tracked UK consumer sentiment and behaviour as the cost-of-living crisis has unfolded through multiple phases.
Our latest Q2 2026 data points to a clear shift: underlying pressures have not disappeared, but the drivers are changing. External factors are reasserting themselves, adding a new layer of volatility just as households were beginning to adjust.
Three consecutive quarters of declining confidence now coincide with a renewed, externally driven energy shock. This signals not just continued pressure, but a change in what is shaping the outlook.
The cost-of-living crisis has always had global roots. What we are seeing now is those forces becoming more visible again, with implications for inflation, household finances and policy over the coming period.
Confidence is Weakening, and Behaviour is Following
Across our tracking, 63% of UK consumers now believe the economy is on the wrong track. This is translating directly into behaviour.
Consumers are less likely to dine out, travel or make major purchases in the near term. But this is not simply a reduction in spending. It is a shift in how decisions are being made.
Consumers are becoming more deliberate, trading down, switching brands and reassessing what still represents value. This is not a passive response. It is active reallocation.
Financial Pressure is Becoming More Visible
28% of households now report that their personal finances have worsened. At the same time, a sustained majority continue to feel the impact of rising prices on their budgets, suggesting pressure is becoming more embedded.
The result is more controlled, more selective spending.
Inflation Risk is Re-emerging
One of the clearest signals in the data is the renewed visibility of rising energy and fuel costs. Perceptions of price increases in these areas are accelerating again.
Energy costs do not remain isolated. They feed through into transport, food and wider supply chains, creating broader inflationary pressure. When consumers expect prices to rise, behaviour adjusts quickly, amplifying the impact.
For policymakers, this creates a familiar tension. Supporting growth while containing inflation becomes more difficult if price pressures re-emerge. The likelihood of a more constrained policy environment later in 2026 increases under this scenario.
Implications for Brands and Businesses
What we are observing is not simply a weaker consumer. It is a more active and more selective one.
Spending is not disappearing but being reallocated. Consumers are making clearer decisions about where value still exists and where it does not.
There are several consistent patterns emerging in the data:
Value is being reassessed in real time
Consumers are increasingly willing to switch, trade down and reconsider established habits. Value is defined at the point of decision, not assumed.
Perception is accelerating behaviour change
Visible price increases, particularly in energy and fuel, are reinforcing caution. How value is communicated is becoming as important as price itself.
Larger purchases are being delayed
Consumers are holding back on big-ticket items while continuing to make smaller, lower-risk decisions.
Consumer behaviour is fragmenting
Financial pressure is not evenly distributed. A single view of the consumer is increasingly insufficient.
A Changing Phase of the Crisis
This latest wave of data suggests the cost-of-living crisis is entering a new phase, shaped by renewed external pressures and more deliberate consumer behaviour.
Understanding not just how much consumers are spending, but how they are making decisions, will be critical in the months ahead.
This is a space we continue to track closely, with each wave of data adding to our understanding of how the crisis is evolving.
This is one of several trackers we run to help clients see what’s coming next, with a clearer view of how consumers are changing and where pressure will show up. If you would like to explore the full dataset or understand how these shifts are playing out in your sector, get in touch.