Consumer spending slows in January

Consumer card spending rose by only 7.4% in January compared to the same period in 2020, marking the smallest uplift since April 2021, as spending was dampened by ongoing Plan B restrictions, inflation, and rising energy costs.

In light of this, hospitality and leisure spending swung to a decline last month, with spending down by -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). Meanwhile, bars, pubs and clubs (14.9%) also saw a smaller month-on-month uplift (up 21.2%).

However, while hospitality and leisure declined overall, spending remained stable amongst  both 16-24 and 25-34-year-olds, whose spending was up by 0.9% and 0.5% respectively. According to Barclaycard, this was possibly due to younger consumers feeling less concerned about catching Covid-19, and being more comfortable with socialising in general.

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

A quarter of UK adults said they are spending more on items and experiences to lift their spirits and stay motivated, with 39% of these planning to eat and drink out more often. In addition, 31% said they feel confident that the vaccine booster rollout will lead them to increase their spending on socialising and shopping in-store.

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

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.”

He added: “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.”