By Andrew Phillips, Managing Director, V12 Retail Finance
Our Q1 reflection described a market defined by caution, resilience and gradual adjustment. As we move through Q2, those themes remain, but there is now greater clarity around how consumers and retailers are adapting in practice.
Rather than marking a sharp change in direction, Q2 has reinforced the trends already shaping the market.
A more considered consumer, as anticipated
The shift toward more cautious, deliberate spending has continued throughout Q2.
Seasonal moments such as Easter demonstrated that demand remains present but controlled. Spending held up despite ongoing pressure on household finances, with shoppers continuing to prioritise key occasions while remaining highly value conscious.
At the same time, there has been little evidence of a return to impulse-led purchasing. Separate data through Q2 reinforces that many consumers are still delaying larger financial decisions and focusing spending on essentials or meaningful purchases.
For retailers, the message is not that customers have stopped spending. It is that they need more confidence before they commit. Finance continues to support that behaviour, not as a driver of additional spend, but as a tool to enable affordability and confidence when customers choose to act.
Stability over acceleration
The expectation at the start of the year was for gradual improvement rather than an immediate shift in conditions. Q2 has reinforced that view.
The Bank of England has held the base rate at 3.75%, while inflation has eased to around 2.8%, closer to target, but still subject to upward pressure later in the year.
This has created a more stable, but still constrained, environment. Borrowing costs remain elevated compared to previous years, and affordability continues to shape purchasing decisions, particularly for higher-value items.
That means consistency and clarity remain critical. Retailers and lenders are having to focus less on chasing rapid growth and more on supporting sustainable, well-structured performance.
Big-ticket restraint remains
Big-ticket restraint remains one of the clearest signals in the market.
At the start of the year, data indicated reduced appetite for major commitments such as large appliances or home improvements. Through Q2, that trend has continued, with consumers still hesitant to commit to higher value spend without strong justification or clear value.
However, this does not mean demand has disappeared. Instead, it has become more selective. Where purchases do go ahead, they are more likely to involve research, planning and consideration, reinforcing the importance of finance in supporting structured, manageable payment options.
Regulation: From expectation to implementation
Regulation, particularly around Buy Now Pay Later, remains one of the most significant developments for 2026.
In Q2, that transition has moved from expectation to implementation.
From 15 July 2026, Deferred Payment Credit (commonly referred to as BNPL) will come under full Financial Conduct Authority regulation. This will introduce requirements around affordability assessments, clearer customer information and stronger protections.
This is a major milestone for the sector. What was previously a fast-growing but lightly regulated space will now sit within a more defined regulatory framework.
This should not reduce the role of flexible payment options. Instead, it should strengthen trust and consistency across the market. As implementation approaches, the direction is clear: the focus is on improving outcomes, not limiting access.
Retail resilience with clear boundaries
Retail has remained resilient despite weaker confidence, and Q2 data supports that position.
Retail sales volumes have seen modest growth, rising 0.4% over the three months to May and 3.2% year-on-year, indicating that activity continues despite ongoing pressures.
Across Q2, our focus has been on helping retailers maintain conversion, particularly in categories where customers are taking longer to commit or are more sensitive to upfront cost. By offering structured, flexible payment options, we are supporting customers in making confident decisions, without introducing unnecessary complexity.
What has changed?
While many Q1 themes have carried through into Q2, a key shift has been the level of certainty.
At the start of the year, much of the discussion centred on what might happen, how consumers would respond, how the economy would settle and how regulation would evolve.
By the end of Q2, there is greater clarity:
• Consumer caution is not temporary: it is embedded behaviour
• Economic conditions are stabilising, but not quickly improving
• Regulation is no longer theoretical: it is actively shaping the market
That matters. It gives retailers and finance providers a clearer basis for planning, even in a constrained environment.
Looking ahead
As we move into the second half of 2026, the market is likely to remain cautious, considered and shaped by regulation. For retailers, that means the focus cannot simply be on driving demand. It needs to be on removing friction, building confidence and making it easier for customers to act when they are ready.
The second half of 2026 is unlikely to be defined by rapid recovery. It will be defined by how well retailers respond to a more considered customer. Those that give customers clarity, confidence and manageable ways to pay will be better placed to convert demand when it appears. At V12, that is where our focus remains: supporting partners with finance solutions that are simple, responsible and built around the way customers are choosing to spend now.