EY warns that UK consumer spending growth will slow to 0.3% in 2026 due to inflation spikes linked to the Iran war. Discretionary spending will be particularly affected, impacting consumer-facing companies.
According to EY's economic outlook, UK consumer spending growth is expected to drop sharply from a previous forecast of 0.9% to just 0.3% for 2026. The report attributes this decline to inflation rising to 4%, driven by the economic fallout from the Iran war. Discretionary spending will face the most significant impact, while manufacturing and industrial firms will also suffer due to energy price shocks. Overall, EY predicts UK output growth will slow to 0.8% this year, down from an earlier estimate of 1.3%.