Consumers’ Disposable Incomes Shrink as Iran war Rumbles On

Consumers’ disposable incomes are shrinking as the Middle East conflict rumbles on, raising concerns for the retail and hospitality industries if consumers pull back on spending, RSM UK’s Consumer Outlook shows.

RSM’s survey of 2,000 consumers found that consumers have an average of 22.1% of their income leftover each month after paying for essentials in April 2026, down from 23.4% in February before the Iran war hit. This drop is even sharper for families, down from 26.9% to 23.1% in the same period.

Consumers expect to utilise their savings more, with 21% planning to save less to cover rising costs, up from 17% in February, which rises from 14% to 22% for families. More consumers will also dip into their savings to cover higher costs, up from 5% in February to 9% in April and doubling from 4% to 8% for families.

Jacqui Baker, head of consumer markets at RSM UK: “Disposable incomes are increasingly under pressure which has been compounded since the start of the Iran war. This is particularly troubling for the retail and hospitality industries, who after a pretty bleak start to the year, will have been hoping for spending to pick up as we enter the summer months.

“Families appear to be hit particularly hard, with those feeling “comfortable” with their finances on the decline. This is especially concerning as families are a big driver of overall spending, meaning the knock-on effect for consumer-facing businesses will be exacerbated. One saving grace is the current high savings ratio which could help to smooth through the shock. While that should cushion some of the blow, we’re still likely to see a hit to demand as uncertainty intensifies and consumers are faced with additional price rises.

“Unfortunately, the slowdown in spending is expected to accelerate as consumers take a “wait and see” approach. The first area that households typically cut back on during an economic downturn is retail spend and dining out, meaning there’s likely to be tougher times ahead for consumer-facing businesses.”