UK consumers sharply reduced their spending in February as soaring living costs strained household finances, according to new figures from the British Retail Consortium (BRC). Total retail sales rose by 5.2% compared with a year earlier, up slightly from January's 4.2% growth rate. However, much of the increase was driven by high inflation inflating the value of goods sold, masking weaker sales volumes.
The BRC said energy bills and the rising cost of a weekly shop were forcing shoppers to cut back, ahead of the spring Budget next week. Helen Dickinson, chief executive of the BRC, said many consumers would be concerned as they prepare for further energy price and tax rises in April. She urged the government to avoid additional regulatory costs on business that could compromise retailers' ability to invest in lowering prices and supporting the UK's economic recovery.
Separate data from Barclays, which processes nearly half of UK credit and debit card transactions, showed consumer card spending rose by just 5.9% annually, significantly below the inflation rate of 10.1%. The weakness was attributed to a reduction in discretionary purchases. Clothing spending fell 1.2% year on year, while restaurant spending dipped 3%. Pubs, bars and clubs saw growth of 7.7%, down sharply from 18.1% in January.
A survey of 2,000 consumers for Barclays found more than two-thirds were looking for ways to reduce the cost of their weekly shop. Almost half said they were cutting down on luxuries or one-off treats, while many were switching to discount retailers and shopping around for deals. Food shortages also influenced habits, with half of consumers noticing considerably emptier supermarket shelves amid national supply challenges affecting salad, tomatoes and eggs.
Paul Martin, UK head of retail at KPMG, which helps compile the BRC retail sales monitor, said consumers were continuing to hold back on non-essential spending, with clothing, footwear and accessories declining in February. He noted that furniture and homeware were still driving sales growth but that more categories were recording negative sales year on year as household budgets remained squeezed.
