UK consumer confidence slips as generation gap widens on financial outlook

It’s latest Consumer Pulse report reveals that only 44% of respondents feel positive about their financial outlook for the next year, a decrease of two percentage points since the previous quarter and a notable shift from the rising levels of optimism observed in late 2023.

The impact of high living costs appears particularly pronounced among younger demographics. The survey indicates that 40% of Gen Z respondents anticipate being unable to pay their bills and loans in full, starkly contrasting with just 10% of Baby Boomers who share this concern.

This generational divide extends to spending behaviour; while 57% of Millennials rank housing costs – either rent or mortgage – as a primary worry, only 24% of Baby Boomers reflect similar anxieties.

James O’Donnell, Director of Research & Consulting at TransUnion UK, suggests that the financial landscape has become increasingly complex for consumers, particularly as rising household price inflation and elevated winter energy costs strain budgets.

"It’s crucial that businesses and financial institutions understand and adapt to the evolving financial landscape," he noted, emphasising the divergent attitudes across age groups and income levels.

Interestingly, Gen Z exhibits a notable degree of optimism, with 68% expressing a hopeful outlook for their household finances in the coming year, compared to just 33% of Generation X. This disparity may stem from differing perceptions of income growth; 51% of Gen Z and 36% of Millennials believe their earnings are keeping pace with inflation, while only 20% of Gen X shares this sentiment.

Despite the prevailing financial strains, Gen Z’s willingness to increase discretionary spending contrasts sharply with their older counterparts. The report suggests that Gen Z is the only generation intending to raise discretionary spending over the next three months rather than reduce it.

In contrast, nearly half of the total respondents (43%) plan to cut back on discretionary expenses like dining out and entertainment due to budget constraints. Furthermore, 16% of Millennials reported using more available credit in the last three months to manage financial shortfalls.

As consumers navigate these challenges, understanding the nuances behind the generational divides in financial outlooks and behaviours becomes critical for both businesses and policymakers aiming to address the growing economic pressures affecting UK households.