Growth in UK card spending slows amid rising living costs

Living costs
British consumers spent less on their credit and debit cards in January as Plan B restrictions and rising living costs hit retail, leisure and hospitality. Photo: Matt Cardy/Getty

UK shoppers spent less on their credit and debit cards in January as Plan B COVID restrictions and rising living costs hit retail, leisure and hospitality, compared to previous months.

According to new figures from Barclaycard, consumer card spending rose 7.4% in January compared to the same period in 2020. This was the smallest uplift since April 2021. 

Experts at Barclaycard said, that while these economic headwinds are likely to persist over the coming months, a boost can be expected from Valentine's Day shopping, international tourism and Brits spending more on experiences.

Spending on essential items grew 10.4% — the smallest rise in nine months.

This is largely due to fuel spend seeing its slowest rate of growth, at 6.7%, since October 2021. Plan B measures throughout most of the month also meant Brits travelled and commuted less and worked from home more.

"January’s COVID restrictions, combined with the rise in the cost of living, clearly impacted consumer spending levels in January," said Jose Carvalho, head of consumer products at Barclaycard.

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"While restaurants and bars, pubs & clubs were inevitably hampered by the ongoing pandemic, there are signs of brighter times ahead for hospitality as Brits say they’re planning to spend more on eating and drinking out to lift their spirits during the winter months."

Meanwhile, supermarket spending saw its smallest increase to 13.6% since before the onset of the pandemic, despite rising inflation.

Barclaycard cites consumers shifting their spending to food and drink specialist retailers — up 67.3% — such as butchers, bakeries and recipe box services, as Brits chose to shop locally due to the work-from-home guidance and re-started meal kit subscriptions after the Christmas break as a reason for the growth.

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"The lifting of Plan B restrictions should also provide a welcome boost to many sectors, as workers travel back into the office and socialise over post-work drinks, while businesses will likely start to see the benefits of increased inbound tourism on retail sales too," Carvalho said.

Spending on non-essential items grew at a slower pace in January (6.1%) compared to December (11.5%). This was likely due to the combination of Plan B guidance, and the continued rise in the cost of living.

This comes as nearly nine in 10 (89%) Brits expressed worries about the impact of rising inflation on their household finances, while 30% said they expect increasing household bills to affect the amount they spend on discretionary purchases.

Face-to-face retail spending, excluding groceries, declined 8.5%. Spending on clothing dropped 4.9%, and sports and outdoor retailers also recorded lower levels of growth in January (14.5%), compared to 8.8% and 22% respectively in December.

The travel sector was also impacted by Plan B restrictions, with public transport declining at a steeper 44.4% than in December (28.1%).

Read more: UK house prices hit new high for January as market faces cooldown

Overall hospitality and leisure spending also fell to 6.3% after five consecutive months of growth. Within that, the decline in restaurant spending continued to worsen — at 17.5% lower in January, compared to 14.1% in December. Bars, pubs & clubs (14.9%) also saw a smaller month-on-month uplift, up 21.2%.

Although hospitality and leisure declined overall, spending remained stable among both 16-24 and 25-34-year-olds, up 0.9% and 0.5% respectively. This could be due to younger consumers feeling less concerned about catching COVID, and being more comfortable with socialising, according to Barclaycard.

January also saw DIY enthusiasts embark on home improvements as spending gathered momentum, up 22.3%, compared to 21.5% in December.

Pharmacy and health & beauty retailers also remained strong, (12.8%) as shoppers invested in self-care to beat the January blues.

Despite the ongoing economic headwinds, there are some bright spots on the horizon for retail, hospitality and leisure businesses. A quarter of UK adults (25%) said they are spending more on items and experiences to lift their spirits and stay motivated during the winter months, with 39% of these planning to eat and drink out more often. Similarly, 31% feel confident that the vaccine booster rollout will lead them to increase their spending on socialising and shopping in-store.

Read more: UK consumer confidence hits seven-month high as COVID fears wane

Valentine’s Day should also give retailers and restaurants a further boost, with 28% of Brits planning to celebrate the occasion and this year’s budget set to increase from an average £63 ($85.11) during lockdown in 2021, to an average £77. Some 30% of those celebrating will be looking to spend this increased budget eating out at a restaurant and 29% plan to buy a gift for their partner, such as chocolates or jewellery.

Meanwhile, the colder weather and Plan B guidance resulted in strong growth in "insperiences" — an index which tracks overall spending on at home experiences — which rose 50%. This includes things like digital content, subscriptions and fast food, as consumers enjoyed nights in with a boxset and a takeaway.

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