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Plan B and rising living costs dent consumer spending

Emma Lunn
Written By:
Emma Lunn

Consumer card spending slowed to 7.4% growth in January as Plan B restrictions and rising living costs hampered retail, hospitality and travel, according to Barclaycard.

The figures are compared to the same period in 2020 and indicate the smallest uplift since April 2021.

Barclaycard sees nearly half of the nation’s credit and debit card transactions. Analysis of card spending found that spending on essential items grew 10.4% in January, the smallest rise in nine months.

This can largely be attributed to fuel spend seeing its slowest rate of growth (6.7%) since October 2021, as Plan B Covid restrictions throughout most of January meant Brits travelled less and worked from home instead of commuting.

Despite rising inflation, supermarket spending saw its smallest rise (13.6%) since before the onset of the pandemic. One reason for the slow growth was 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.

Analysts at Barclaycard said that while these headwinds are likely to persist over the coming months, their near-term impact may be somewhat mitigated by anticipated uplifts from Valentine’s Day, growing inbound tourism, and Brits spending more on activities and experiences to lift their spirits during the winter months.

Spending on non-essential items saw noticeably smaller growth in January (6.1%) than in December (11.5%), 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 say they’re concerned about the impact of rising inflation on their household finances, while three in 10 (30%) say they expect increasing household bills to affect the amount they spend on discretionary purchases.

With more Brits staying at home, face-to-face retail spending (excluding grocery) dropped 8.5%, while spend on clothing (4.9%) and sports and outdoor retailers (14.5%) recorded a lower level of growth than in December (8.8% and 22.0% respectively).

The travel sector was also impacted by Plan B restrictions, with public transport seeing a steeper decline (-44.4%) than last month (-28.1%) as working from home guidance saw Brits delay their return to the office.

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

However, while hospitality and leisure declined overall, spending remained stable among both 16 to 24 and 25 to 34-year-olds (up 0.9% and 0.5% respectively), possibly due to younger consumers feeling less concerned about catching Covid-19, and being more comfortable with socialising.

Barclaycard predicts that Valentine’s Day will give retailers and restaurants a further boost, as almost three in 10 (28%) plan to celebrate the occasion, with this year’s budget set to increase from an average of £63 during lockdown in 2021, to an average of £77 this year.

Jose Carvalho, head of consumer products at Barclaycard, said: “January’s Covid restrictions, combined with the rise in the cost of living, clearly impacted consumer spending levels in January. While restaurants and bars, pubs and 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.”

“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.”