KEY TAKEAWAYS

Consumer

• Consumer outlook remains fragile and volatile: Inflation is easing only modestly and is likely to trend upwards again, with higher energy and fuel costs feeding through to household bills and dampening discretionary spending.
  
  
• Confidence remains weak, particularly for big-ticket purchases: Despite a slight improvement in headline sentiment, major purchase intentions have deteriorated, reinforcing pressure on discretionary retail categories.
  
  
• Retailer performance is increasingly polarised: Essential, value-led and trade-focused operators continue to outperform, while more discretionary and big-ticket retailers face softer demand and margin pressure.
  
  
• Fuel costs are an increasingly important driver of behaviour: Rising diesel and petrol prices are having a pronounced impact on consumer confidence, amplifying sensitivity to broader inflationary pressures.

Consumer backdrop

The UK consumer environment remains unsettled. Although headline CPI eased to 2.8% in April 2026, down from 3.3% in March, inflation remains above the Bank of England’s (BoE) 2% target, and the near-term outlook has become more uncertain as higher global energy costs begin to feed through into domestic prices. The BoE left Base Rate unchanged at 3.75% in April, but has made clear that the conflict in the Middle East has materially altered the inflation outlook, principally through higher oil, fuel, and wholesale gas prices. As such, while the latest inflation print was softer, the direction of travel over the coming months is likely to remain upward rather than downward.

This matters for consumer-facing sectors because households are now confronting another visible energy shock. Ofgem has confirmed that the domestic energy price cap will rise by 13% from July, taking the typical annual dual-fuel bill to £1,862, while the BoE has warned that higher oil and gas prices are already feeding into pump prices and will increasingly pass through to utilities, food, and broader supply chains. Shop price inflation has also begun to edge higher again, rising to 1.2% in May, with non-food categories such as furniture and health and beauty already showing signs of renewed pricing pressure.

Consumer sentiment remains correspondingly fragile. GfK’s long-running confidence measure improved modestly to -23 in May, but that slightly firmer headline masks more cautious underlying behaviour. Most notably, the major purchase index fell to -20, its weakest level since January 2025, suggesting that households remain reluctant to commit to discretionary larger-ticket spending. This is relevant to the retail warehouse market, where bulky goods occupiers in particular are more exposed to fluctuations in confidence, real incomes and replacement-cycle expenditure; albeit the market is more resilient than in previous cycles, supported by the structural growth of discount variety retail and its increasing share of floorspace relative to traditional big-ticket categories.

The latest official retail sales data reinforces that picture. Retail sales volumes fell by 1.3% month-on-month in April, the sharpest monthly decline in almost a year, with automotive fuel especially weak after motorists brought purchases forward into March as prices rose. Even excluding fuel, sales still fell by 0.4%, indicating that consumers are becoming more price sensitive and more selective in their spending decisions. While three-month trends remain firmer than the monthly data alone would suggest, the broader message is that trading conditions remain volatile and highly reactive to visible cost shocks.

Fuel prices and consumer confidence

One of the clearest features of the current cycle is the extent to which fuel costs are again shaping household sentiment. Our analysis shows that the relationship between fuel prices and consumer confidence has strengthened materially during periods of geopolitical energy stress, and that diesel prices in particular now appear to have a more pronounced effect on confidence than petrol. This is significant because diesel is more closely linked to freight, haulage and distribution costs, meaning households interpret rising diesel prices not simply as a transport cost issue, but as a broader signal of inflationary pressure across the economy.

The historical pattern is instructive. During more stable periods, the relationship between fuel costs and confidence has tended to be present but moderate. By contrast, during major energy-related geopolitical shocks, it becomes markedly stronger. That was evident during the Ukraine conflict and has intensified again during the recent Iran-related disruption. In effect, fuel prices have become one of the most visible and immediate indicators through which global instability is transmitted into household finances and consumer psychology.

For retail warehousing, this has two important implications. First, confidence is now more vulnerable to abrupt changes in energy markets than it was during other periods of macroeconomic stress, such as the Global Financial Crisis, when banking fears were a more important driver of sentiment. Second, the resulting consumer response tends to favour formats and occupiers exposed to value, convenience and essential spend, while more discretionary and big-ticket categories become more volatile. In this respect, the current environment remains challenging, but not uniformly negative, for the retail warehouse market.

KEY PERIODS: Fuel Prices versus Consumer Confidence

• Pre-Crisis Period (2003–2007): Correlations were moderate at approximately -0.50 for both fuels, reflecting a period of relative economic stability during which fuel prices and consumer confidence moved somewhat independently.

• Financial Crisis (2008–2009): Remarkably, the relationship almost broke down completely. Diesel showed only -0.315 correlation, while petrol was nearly uncorrelated at +0.092. This anomaly occurred because consumer confidence collapsed due to fears surrounding the banking sector rather than fuel costs, and sentiment became decoupled during extreme economic volatility.

• Recovery Period (2010–2014): Correlations remained weak (-0.291 for diesel and -0.328 for petrol) as consumer confidence recovered independently of fluctuating fuel prices.

• Brexit Era (2015–2019): The relationship strengthened significantly, reaching -0.691 for diesel and -0.690 for petrol – notably stronger than the pre-crisis baseline. Political uncertainty amplified consumers' sensitivity to everyday cost pressures.

• Covid-19 and After (2020–2026): Correlations moderated to -0.533 for diesel and -0.427 for petrol, with pandemic-related factors introducing additional noise.

• Ukraine/Iran War Era (2022–2026): This period shows the strongest correlations ever recorded: -0.890 for diesel and -0.789 for petrol. This near-perfect inverse relationship indicates that during geopolitical energy crises, fuel prices become the dominant driver of consumer sentiment.

• Hormuz Blockade Period (January–March 2026): Early 2026 shows how geopolitical energy shocks are feeding into consumer sentiment. Following the Hormuz blockade, diesel prices rose by approximately 13p per litre within a month and have a strong negative correlation with confidence (-0.722), with petrol slightly weaker. This highlights fuel costs – particularly diesel – as a key channel through which supply disruptions quickly affect household sentiment and spending.

Implications for retailer performance

That divergence is increasingly visible in retailer trading. Across the home improvement market, trade-led and operationally efficient businesses continue to show greater resilience than consumer-dependent, big-ticket operators.

Kingfisher’s latest results highlight a clear split between consumer and trade performance, with Group LFL sales marginally negative (-0.7%). B&Q declined by -4.1%, reflecting weaker footfall, softer big-ticket demand and a -7.5% fall in seasonal categories. In contrast, Screwfix delivered +4.1% LFL growth, with core categories up +5.1%, supported by strong trade demand and loyalty initiatives. More broadly, Kingfisher’s trade sales increased by 17% (excluding Screwfix), underlining a structural shift towards trade-led resilience.

A similar pattern is evident at Wickes, where more recent trading points to modest top-line growth but softer like-for-like (LFL) performance. In the opening months of 2026, revenue increased modestly (+1.3%), while LFL sales were marginally negative (- 0.1%), reflecting weather-driven weakness in outdoor categories and more cautious DIY spend. However, trade continues to outperform, with TradePro sales up +4%, reinforcing the relative resilience of professional demand.

Elsewhere, the picture is more mixed. Victorian Plumbing delivered particularly strong first-half growth, with revenue up 10.5%, reflecting continued market share gains, strong traction in trade and increasing penetration in adjacent categories such as tiles and flooring. By contrast, more discretionary home-related operators remain more exposed. For the 13 weeks to 28 March 2026, Dunelm’s performance weakened, with growth slowing to +2.1% as falling consumer confidence drove a broad-based softening in demand, leaving profit expected at the lower end of guidance. Meanwhile, DFS reported strong interim sales growth of 8.7% (for the 26 weeks to 28 December 2025) but has since indicated that footfall has softened as consumer confidence has weakened. The broad pattern is therefore one of resilience in essential, trade-led and value propositions, but greater volatility in more discretionary categories.

Beyond core retail warehousing categories, performance reflects broader consumer behaviour trends. Tesco’s UK food sales grew +5.2% LFL, highlighting the resilience of essential spend and continued consumer trading down, while non-food remains more mixed. Marks & Spencer’s food sales rose +7.0%, offsetting weaker non-food performance (-7.7%), again reinforcing the relative strength of essential and habitual spend. Meanwhile, Pets at Home saw retail revenue decline -1.0%, with growth instead driven by its more defensive veterinary and subscription-led services (+5.0%), reflecting shifting consumer priorities towards recurring and essential expenditure.

Meanwhile, Next continues to outperform, with UK full-price sales up +4.4%, driven by online (+10.1%) – underpinned by strong value positioning and brand curation – demonstrating that well-executed mid-market propositions can still capture spend despite macro headwinds.

The implication for retail warehousing is important. The consumer backdrop is undoubtedly more challenging than it appeared at the start of the year, but the sector’s occupational base is increasingly concentrated in those categories that remain relatively well-positioned: value, convenience, discount grocery, trade-led retail and essential spend. That has been a key reason why occupier appetite has remained strong in this sector despite softer macroeconomic conditions.

_{Read the articles within Spotlight: UK Retail Warehousing below.}