Improving Financial Outlook Among Consumers, Yet Inflation Continues to Present a Major Issue
UK Consumers Show Increased Financial Optimism Amidst Economic Pressures
A new report from TransUnion reveals that more than two in five UK consumers are optimistic about their household finances over the next 12 months. The Q2 2025 Consumer Pulse report indicates a significant rise in financial optimism, with 43% of consumers expressing optimism, up from 41% in Q1 2025 and a substantial increase from 26% in Q3 2022.
This optimism is particularly strong among Gen Z, who reported a 64% optimism rate, up 9 percentage points year-on-year. However, inflation remains a dominant concern, with 85% of UK adults ranking it among their top three financial worries.
James O'Donnell, Director of Research & Consulting at TransUnion in the UK, emphasises the importance of access to responsible credit and effective credit education in today's economic climate. He states, "In the face of ongoing economic pressures, it's crucial that consumers have the tools and knowledge they need to manage their finances effectively."
When it comes to credit usage, consumers are being cautious. Serious hardship appears limited, with only 3% relying on debt to cover essentials, and consumers increasingly focusing on responsible credit use and credit education.
Regarding trends by age group, Gen Z stands out not only for their optimism but also for heightened financial concerns, particularly housing costs (61%), compared to Millennials (52%) and the broader population (42%). Gen Z consumers are also more proactive in managing their credit, with nearly 90% regularly checking their credit reports.
The most common products among those planning to apply for new credit or refinance include credit cards (57%), buy now, pay later services (26%), and personal loans (26%). Despite the increased optimism, only half of Gen Z (50%) and Millennials (52%) believe they have sufficient access to credit and lending products.
Recession fears were the third most cited concern, with 49% of UK adults citing them. Interest rates were the second most cited concern, with 54% of UK adults citing them. In a surprising development, household inflation unexpectedly jumped to 4.1% in the year to June.
Overall UK consumer confidence has declined slightly in Q2 2025, with the Deloitte Consumer Confidence Index falling to -10.4%. This decline is due to concerns about job security and rising debt sentiment, which are influenced partly by seasonal costs like utility renewals and holiday spending.
In summary, the Q2 2025 data reflects a nuanced picture. UK consumers, especially younger groups, are increasingly optimistic about their personal financial prospects and credit management despite inflationary and economic pressures that continue to temper broader economic confidence. However, concerns about inflation, recession, and interest rates persist, highlighting the need for continued financial education and responsible credit use.
Business optimism among UK consumers regarding their personal finance within the next 12 months is increasing, as revealed by TransUnion. Despite this optimism, financial worries, such as inflation and recession fears, remain dominant concerns for many. Effective credit management and education are crucial tools for consumers navigating today's economic climate.
