UK consumer spending remains strong in boost for growth hopes
The pick-up in consumer spending has raised hopes the economy may start to recover after barely growing at all in the final six months of last year
[LONDON] UK households increased their spending in March as consumer demand defied an imminent rise in household bills, according to reports from the British Retail Consortium (BRC) and Barclays.
BRC chief executive Helen Dickinson said there were “signs of underlying strengthening of demand” and Barclays’ Consumer Spend Report showed that “confidence in discretionary spending remained resilient”. A majority of people now plan to buy British products following the sharp rise in US tariffs, Barclays added.
The studies followed last week’s surprisingly robust GDP growth in February of 0.5 per cent, which was driven in part by consumption. Output in consumer facing services alone increased by 0.7 per cent in the month, the official figures showed. UK households are in a solid financial position after more than a year of above-inflation pay rises that have enabled them to tuck away savings.
The pick-up in consumer spending has raised hopes the economy may start to recover after barely growing at all in the final six months of last year, when the Labour government talked down the economy and hit employers with a £26 billion (S$45 billion) hike in jobs taxes. The BRC said there were now “green shoots for retail sales” after a weak end to 2024.
However, US President Donald Trump’s global trade war and weak sentiment among businesses after Labour’s tax rises came into effect this month threatens to undermine the positive momentum.
The BRC said total retail sales increased 1.1 per cent year on year in March, weaker than March 2024 but the figures were distorted by Easter this year falling in April. “Despite a challenging global geopolitical landscape, the small increase in both food and non-food sales masked signs of underlying strengthening of demand given March’s comparison with last year’s early Easter,” Dickinson said. But she warned that retailers will pass on their £5 billion share of the tax rise and another £2 billion from a new packaging levy, which “will undoubtedly increase inflation later in the year”.
Barclays’ survey, which was carried out after Trump’s so-called Liberation Day on Apr 2, showed the tariffs are changing behaviour. Of the 2,000 respondents to its survey, 39 per cent claimed to have been “influenced by recent news around tariffs to make changes to my shopping habits”, 71 per cent “want to support UK businesses by buying more UK products” and 40 per cent are actively looking for British alternatives to overseas goods.
Cutting back
Barclays said households are also seeking savings as they face a £600 increase in basic costs, from council tax to energy and water bills. Nearly two-fifths, 37 per cent, of adults are trying to reduce their outgoings in March in anticipation of rising household bills, Barclays said. A third of households with digital TV subscriptions have cancelled one for money reasons and 12 per cent are now rotating services to make sure they only pay for what they want to watch.
Spending on experiences continued to increase, with a 2.8 per cent rise in hospitality & leisure spend in March and a 5.7 per cent increase in travel spend. BLOOMBERG
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