UK consumers have cut back on travel spending for the first time in five years, as concerns over the rising cost of living and the ongoing Middle East conflict take hold. According to data from Barclays, overall consumer card spending increased by just 0.9% year on year in March, down from 1% in February.
Travel spending fell by 3.3% last month, the first decline recorded by the lender since March 2021. People spent less at travel agents (down 4.6% annually), airlines (-4.1%) and on public transport (-2.9%). However, spending on hotels and accommodation rose by 1.2%, driven by a preference for UK-based outings and domestic bookings during the Easter break.
The Middle East conflict, which began in late February with US-Israeli attacks on Iran, has prompted one in seven adults to delay major purchases or build up savings to prepare for rising energy costs. While the UK energy regulator reduced the price cap by 7% from 1 April, bills are forecast to jump by 18% in July due to higher wholesale costs.
Spending on essentials such as food and petrol rose by 0.5% last month, led by a 1.6% increase in fuel spending – the first rise since February 2023. Surging oil prices have pushed up prices at the pumps. Growth in non-essential discretionary spending slowed to 1.1%, with consumers still spending on clothing (up 3.6%) and entertainment (+3.5%).
Jack Meaning, chief UK economist at Barclays, said: “Shoppers delaying major purchases and building up a savings buffer in response to the shock from the Middle East reinforces our view that activity will be muted in the coming months.” He added that the Bank of England should hold interest rates to balance the softening economy with inflation.
A separate report from the British Retail Consortium showed UK retail sales increased by 3.6% year on year in March, driven by a 6.8% jump in food sales. However, non-food performance was uneven, with clothing and footwear struggling. Helen Dickinson, chief executive, noted that disruption to international travel from the Middle East conflict also hit sales of travel-related goods.
