Shocker ahead of Christmas: British consumer spending growth slows

Recent data from Barclays reveals a worrying trend in the spending habits of consumers in the United Kingdom. The data shows that there has been a slowdown in the growth of consumer spending, which is now at its lowest level in over a year.

The Barclays report, based on spending through debit and credit cards between September 24 and October 21, shows an increase of only 2.6 per cent compared to the same period in the previous year. This marks the smallest annual surge since September 2022 and represents a significant decline from the 4.2 per cent growth observed in the prior month.

The survey reveals that 37 per cent of households are planning to reduce their Christmas spending due to high day-to-day expenses. On the other hand, only 13 per cent of households plan to increase their expenditure during the holiday season. The survey involved 2,000 households.

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Consumer price inflation in the UK rose to a significant 6.7 per cent in September, leading to a decline in the volume of goods and services purchased by British consumers in real terms. As the festive season approaches, concerns about the increasing cost of living appear to have had a significant impact on consumer behaviour.

Esme Harwood, director at Barclays, has observed a change in consumer behaviour in the UK. Britons are now more careful with spending, particularly on non-essential items like clothes and dining out. This shift in focus is due to people saving up for the upcoming holiday season and budgeting for increased winter fuel bills. Additionally, the recent hot weather has impacted spending on indoor leisure experiences.

During the overall pullback in spending, the hospitality sector has been a notable exception. The spending at pubs, bars, and clubs grew by 5.9 per cent, due to the enthusiasm of fans who gathered to watch the Rugby World Cup.

According to a reportfrom the British Retail Consortium (BRC), consumer spending has been subdued. The BRC report indicates that major retailers witnessed a slowdown in spending growth, dropping to a three-month low of 2.5 per cent in October from 2.7 per cent in September. The BRC data covers the period between October 1 and October 28.

It notes the improved demand for autumn and winter outdoor clothing as the weather turned wetter and cooler towards the end of the month. However,non-food spending declined by 1.0 per cent over the same period, highlighting a significant disparity in consumer spending patterns.

Helen Dickinson, CEO of the British Retail Consortium, said that households must delay Christmas spending for Black Friday deals, amid the uncertain economic outlook.

(With inputs from Reuters)

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