Brits’ disposable income shrinks in disappointing Golden Quarter
Brits feel far poorer now than they did at the start of 2025, with even high-income households downbeat about their financial prospects.
In January, people were four per cent more likely to say their pay had gone up rather than down, but Brits are now seven per cent more likely to have seen their pay packet shrink, marking an 11 per cent swing.
This comes during a disappointing Golden Quarter – the end-of-year period which retailers rely on for high sales – marred by high consumer caution.
A new report by Boston Consulting Group (BCG) revealed a tough year for UK consumers, defined by a Budget which will hurt their personal finances.
Low-income households were the most likely to report a drop in their disposable income, but high earners have become increasingly pessimistic about their purchasing power.
In August, 66 per cent of households earning £83,000 or more said they expected to get richer, but only 42 per cent said the same in December.
Older people are more likely to feel downbeat about their personal finances and have focused on buying the essentials, while young people plan to splash out on entertainment and clothes.
Consumer recovery unlikely in 2026
Raoul Ruparel, director of the BCG’s centre for growth, said 2025 failed to deliver on “strong expectations” of a return to high consumer confidence and spending, leaving a poor outlook for next year.
“Even those at the top end of the income spectrum, who have been driving most spending this year, are becoming more pessimistic about their own personal finances,” he said.
“If this continues, the likelihood of a consumer recovery in 2026 is low, with implications for the UK economy more broadly.”
In a further sign of growing consumer caution, tax firm RSM’s consumer outlook survey found the majority of Brits would put any extra money towards savings, with only a fraction feeling confident enough to use it to splash out on Christmas gifts.
If given a £5,000 one-off sum, nearly six in ten consumers would choose either to save the cash or use it to pay off debts, while only eight per cent would add it to their holiday spending budget.
The amount Brits are spending on their cards fell by the highest amount year on year since February 2021, according to a recent Barclays survey.
Earlier this week, another survey found households’ nerves about their future finances have jumped to a two-year high.
Jacqui Baker, head of consumer markets at RSM, said consumers are “battening down the hatches” following a Budget which failed to make Brits feel richer.
She explained: “The Golden Quarter had already been lacklustre so far, as consumers deferred spending in the lead up to the budget due to constant speculation and uncertainty.”
“Now we’re likely to see the final month of this crucial period for the sector impacted, along with a slow start to next year,” Baker added.