(Bloomberg) -- UK credit and debit card spending barely grew in 2024 as cautious consumers treated themselves to small luxuries, concerts and travel while cutting back on food and big-ticket purchases, according to research Tuesday that provides a warning sign for the Labour government’s growth ambitions.
In trends set to continue next year, spending on essentials increased just 0.9% in 2024, down from 3.9% last year, due to weak supermarket and fuel sales, a Barclays report tracking card transactions showed. Meanwhile, non-essential spending held up better thanks to blockbuster live events such as Taylor Swift’s Eras Tour and the so-called “lipstick effect” — indulging in small mood-boosters in tough economic times, Barclays said.
“This conscious consumerism will continue to shape spending in the new year, with entertainment likely to maintain its momentum, as Brits continue to embrace their ‘new essentials’,” Karen Johnson, head of retail at Barclays, said in a statement.
The caution of consumers — who make up about two-thirds of the economy — comes despite growing real incomes and easing borrowing costs. That highlights the tough job facing Starmer and Chancellor of the Exchequer Rachel Reeves as they seek to get Britain’s economy firing again after a period of sluggish growth.
While Labour’s budget at the end of October put an end to anxieties over tax rises, they’ve been replaced by fears of job cuts, economic stagnation and rising inflation in 2025.
For now, households are putting more of their income gains aside, pushing the savings rate well-above the historic average. Almost half of UK consumers said they were cooking more at home to save money while almost a quarter said they’ve either participated or would be interested in joining a ‘no-spend challenge’ which implies avoiding spending on items such as takeaways, coffee or clothes, according to Barclays.
Instead, travel and entertainment are becoming the new essentials, the bank said. While households are still hunting for food discounts in supermarkets, almost 40% said they spend more than planned when going on holiday. And despite soaring streaming subscriptions prices, only a minority of Britons who are reducing their discretionary spending said they would cut spending on that category.
©2024 Bloomberg L.P.