The GfK UK Consumer Confidence Index sits at -16. It has not been positive in a decade. Inflation remains at 3.4%, still above the Bank of England’s 2% target, despite four interest rate cuts in 2025 that brought the base rate to 3.75%. Political debate over fiscal direction continues. Geopolitical instability lingers.
Yet retail sales values grew by 3.4% year-on-year in 2025, with volumes up 1.8%, outpacing GDP growth. But Savills Q4 2025 Spotlight identifies a split that has come to define the British consumer.
As Sam Arrowsmith, Director of Commercial Research at Savills, puts it: “Many feel increasingly confident in their ability to manage their own personal budgets, yet remain sceptical about the wider economic outlook.”
If 2025 had a defining consumer pattern, it was the recalibration of essentials. Barclaycard data cited by Savills shows essential spending fell modestly over the year, and supermarket visits became less frequent. Households consolidated shopping trips, leaned into value ranges and avoided impulse purchases. Grocery spending edged down in value terms, even as volumes returned marginally to growth for the first time since 2021.
By tightening everyday expenditure, consumers created space for selective discretionary purchases. Non-essential spending rose slightly, with notable strength in health and beauty and in certain apparel categories. Furniture also performed steadily.
Savills characterizes this as a “trading-down” dynamic. Households are not simply choosing cheaper goods; they are reallocating expenditure. Money saved on routine food shopping becomes money available for occasional indulgence — small luxuries, seasonal treats, or purchases tied to wellbeing.
The Christmas period reinforced this pattern. Grocery-led propositions and value-focused operators traded solidly but consumers were tactically delaying purchases to coincide with discount windows.
Demanding cost environment
Overlaying consumer discipline is a cost environment that remains demanding. Business rates reform will, from April 2026, introduce a surcharge on larger commercial properties, increasing the tax burden for major operators. Employer National Insurance contributions are rising. The National Minimum Wage has been lifted. Energy and input costs remain exposed to geopolitical volatility.
In leisure and hospitality, sales growth in 2025 was accompanied by falling transaction numbers — suggesting inflation, rather than increased footfall, drove revenue expansion.
Given these pressures, widespread insolvency might have been anticipated. The Savills report suggests a more nuanced outcome. Store closures remain elevated in absolute terms, but insolvency-led failures have declined from pandemic-era peaks. National chains have pursued targeted restructurings, exiting weaker locations rather than abandoning estates wholesale. Closures linked to major administrations represent a small fraction of total retail stock.
High demand at prime locations
This distinction becomes clearer when viewed through occupancy data. High street vacancy fell to 13.4% in the final quarter of 2025; shopping center vacancy declined to 16.9% — the lowest since 2020. Demand for well-configured space in dominant locations remains steady.
Prime Town Centre Zone A rents in major cities have risen since mid-2024, while average headline and net effective rents across high streets and shopping centers increased during 2025. Incentives are tightening. Landlords are relying less on extended rent-free periods to secure tenants.
This points to a market correcting earlier overcapacity. Savills notes that the UK’s oversupply of retail space is being addressed through repurposing. Secondary and tertiary locations are increasingly transitioning towards mixed-use schemes, community services, residential and healthcare functions. Not every town requires — or can sustain — a full-service retail core.
The Store as Infrastructure
One of the quieter conclusions of the Savills report concerns omnichannel integration. Online spending continues to grow, but the strongest performance comes from retailers that treat physical stores not as legacy cost centers, but as infrastructure — fulfilment hubs, click-and-collect nodes, brand platforms.
As Arrowsmith observes: “Central to outperformance was not digital alone, but the integration of digital with store infrastructure.”
The store is no longer in competition with e-commerce. It underpins it. Retailers aligned with this logic — particularly in grocery, value-led propositions and specialist categories — have continued to expand selectively. The occupational market reflects that pragmatism: acquisitions marginally outpace disposals, and leasing momentum persists in the strongest environments.
The Savills 2026 outlook is cautiously optimistic: Vacancy rates have stabilized. Prime rents are firming. Retail sales have held up better than the broader economy might suggest. Consumers have adapted to permanent uncertainty. Operators have embedded volatility into planning. Landlords have recalibrated pricing and repurposed surplus stock.
A decade of negative sentiment has changed the character of spending. Retail in 2026 does not look like it did before the shocks of the past decade. Instead, it has absorbed them.
For more information, please see Savills Spotlight: Shopping Centre and High Street – Q4 2025
