Financial optimism escalating among consumers, yet inflation continues to be a prevailing concern
UK Consumers Show Increased Financial Optimism Amidst Persistent Financial Concerns
In Q2 2025, financial optimism among UK consumers has surged, with 43% expressing optimism about their household finances over the next 12 months. This is a significant increase from the 26% recorded in Q3 2022 and 41% in Q1 2025 [1].
However, despite this growing optimism, inflation remains the top financial concern for 85% of UK adults. Interest rates (54%) and housing costs (42%) follow closely as significant worries. These concerns are particularly prevalent among younger consumers, with 61% of Gen Z and 52% of Millennials citing housing costs as a key concern [1].
The high inflation rate of 4.1% in the year to June 2025, ongoing high interest rates, and economic uncertainties are factors contributing to these financial concerns. While personal financial confidence has risen, overall consumer confidence indexes, such as Deloitte's, have shown a decline in economic sentiment [3].
Despite these challenges, a majority of consumers reported managing their finances without cutting discretionary spending, and serious hardship was relatively limited [2].
Access to credit and lending products is a crucial factor in consumer financial health. Despite 97% of Gen Z and 93% of Millennials believing in the importance of access to credit, only half believe they have sufficient access [4]. James O'Donnell, Director of Research & Consulting at TransUnion in the UK, emphasizes the importance of access to responsible credit and effective credit education in the current economic climate [5].
Monitoring credit reports is another key aspect of financial health. Nearly 90% of Gen Z report that they monitor their credit, reflecting both their awareness and the industry's efforts to improve financial literacy [6]. Gen Z consumers are most likely to monitor their credit reports, with 89% doing so [7].
In response to these financial concerns, 47% of consumers have reduced discretionary spending - including dining out, travel, and entertainment - in the past three months, with 41% planning to cut back further over the next three months [4].
In conclusion, while UK consumers, especially younger age groups, are increasingly optimistic about their personal finances in Q2 2025, inflation, interest rates, and housing costs continue to weigh heavily on their financial concerns [1][2][3]. Access to responsible credit and effective credit education is more important than ever in this economic climate.
[1] TransUnion Q2 2025 Consumer Pulse Report [2] Bank of England Report, June 2025 [3] Deloitte Economic Outlook Report, Q2 2025 [4] TransUnion Credit Industry Insights Report, Q2 2025 [5] Statement by James O'Donnell, Director of Research & Consulting at TransUnion in the UK [6] TransUnion Credit Monitoring Awareness Survey, Q2 2025 [7] TransUnion Credit Monitoring Usage Survey, Q2 2025
- Despite the surge in financial optimism among UK consumers regarding their personal finances, the high inflation rate, ongoing high interest rates, and housing costs remain significant concerns, particularly for younger consumers.
- In the current economic climate, effective credit education and access to responsible credit products are crucial for managing personal finances and addressing the persistent financial concerns among UK consumers, especially Generation Z and Millennials.
