The UK consumer economy may finally have grounds for cautious optimism, but shoppers will have to wait until 2027 to feel the benefit, according to Shore Capital.
The broker, a smaller player but one well regarded for its retail expertise, said it had begun 2026 hopeful of an upturn, only for the outlook to be derailed by February's conflict in the Middle East and the surge in global energy costs that followed.
As autumn arrives, it sees reasons to be a little more positive again.
Chief among them is a shift in the political weather, with Andy Burnham's arrival in Downing Street lifting the national mood after what the broker bluntly called the ineptitude of the Starmer and Reeves era.
Shore noted that the GfK consumer confidence index rose in both July and August, a welcome change, while the household savings ratio, though down from a year earlier at 8.9%, remains above its long-run average, hinting at a growing willingness to spend.
The caveats, however, are substantial.
The broker warned that cost-driven inflation, particularly energy, could push UK interest rates higher before they fall, with base rates still at 3.75%.
It flagged the risk that New Year home heating bills could jump more than 20%, alongside stubbornly high gilt yields and the threat of another difficult Budget.
Against that backdrop, Shore expects a competitive Christmas with no clear tailwinds, and believes any meaningful recovery in discretionary spending will arrive well into 2027.
Home-related categories such as furniture, flooring and electricals offer the clearest cyclical upside, the broker said, given strong balance sheets and the operational leverage that even a modest volume recovery could unlock.
Other discretionary goods, from apparel to sporting goods, are expected to recover unevenly, with experiences still taking share from goods, especially among younger shoppers.
Shore said it preferred well-capitalised, cash-generative operators with market share momentum, differentiated products and credible self-help.
Non-discretionary and consumer services names, it added, still tend to screen more attractively than discretionary goods, reflecting their more resilient demand.
