Consumers are feeling more optimistic about economic conditions in Britain despite costs continuing to rise, according to new data from the British Retail Consortium (BRC).

The UK retail trade association, which tracks consumer sentiment surrounding the economy and personal finances every year, finds that consumer expectations over the next three months of the state of the economy improved to -32 in January.

In December, it was -38, suggesting that British consumers were more worried about the country’s economy during the run-up to Christmas - a time when consumer spending typically skyrockets.

According to the BRC, this is the second year in a row that consumers have gone into January feeling more confident about the economy.

Helen Dickinson, chief executive of the BRC, commented on the finding: “The new year brought hints of optimism, with the second consecutive improvement in consumer confidence in the economy and in people’s own finances. This was the highest in five months, though similar to a year earlier.”

In another positive finding, the BRCs data suggests a modest improvement in consumers' financial situations. As of January, this metric is -8, compared to -10 last month.

Despite this, many consumers still seem to be concerned about the rising cost of living. With this in mind, they’re not spending as much money in shops or on themselves in general.

The BRC logs personal spending on retail at -6, as opposed to +6 in December, and personal spending overall at +5, compared to +17 around Christmas time.

Instead of spending, consumers are saving their money. This month has seen personal savings increase to +2, whereas it was -9 in December.

Analysing these findings, Dickinson described these spending changes as normal consumer shifts that follow the end of the Christmas period. She added that millennials and Gen Xers likely felt the biggest spending squeezes due to having young families.

Although some of these findings are positive and to be expected, she called on the government to “build momentum and restore confidence to the levels seen in previous years”.

She said: “With wages still struggling to keep pace with higher costs of living, many people feel as though neither their own finances nor the wider economy is moving forward.

“And if business costs continue to accelerate through 2026—from rising business rates to new regulatory burdens—then the risk is clear: inflation remains stubbornly high, and consumer confidence could falter once again.”

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