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Consumer spending down 2.3% in December

Consumer spending declined 2.3% year-on-year in December – the largest decline since June 2020 – as tightened coronavirus restrictions resumed their chokehold on UK retailers and hospitality.

Figures collated from a report by Barclaycard revealed that the hospitality sector was particularly hard hit, with spending at bars and pubs down by 71.4% and restaurants by 65.4%. New measures brought in towards the end of December saw millions of Brits cancel their festive social plans, with bars and pubs suffering from curbs on gatherings and restaurants forced to return to takeaway-only services in the run up to the New Year.

Online retail, on the other hand, increased by 52.2% as Brits shopped from home, continuing the ongoing trend towards online shopping which saw retailers enjoy a surge in online sales during the Christmas period. Specialist retailers (such as toy shops, jewellers and gift shops) and clothing all enjoyed “significant growth online”, rising 61.9% and 34.0% respectively, as shoppers turned to online stores for last-minute gifts and pre-Christmas sales.

Brits also continued to make the most of their time indoors, purchasing new boxsets, downloading new video games and ordering takeaways, with eating and drinking up 81.0% and digital content and subscriptions up 41.4% amid “strong online increases”.

Local shops continued to perform well, with specialist food and drink retailers such as butchers, bakeries and off-licenses recording a 43.7% increase, as more than half (54%) of Brits say they will “do what they can to support” local businesses during 2021.

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However, tighter restrictions on how and when people can leave their homes towards the end of the year saw in-store retail drop 8.3%, with department stores and clothing seeing declines of 15.2% and 7.3% respectively. Airlines and travel agents, however, saw slight improvements in consumer interest as vaccine optimism continues to buoy hopes of a sustained recovery.

While overall travel contracted by 63.8%, there was an “improvement” in spending across some categories in the sector. Airlines saw a less steep decline of 58.1% in December compared to the previous month’s decline of 73.6%. Additionally, travel agents recorded a smaller drop this month of 72.3%, as one in five Brits (22%) say they are “already making plans for a big holiday” at some point in 2021, fuelling optimism for a potential recovery later in the year.

While Brits’ confidence in the economy remains low at just 22%, confidence in household finances is currently at 68%, with almost a quarter of Brits “feeling more confident about spending on non-essential items than they have been for a long time”. Support provided by Chancellor Rishi Sunak’s furlough scheme – extended to at least April 2021 – has no doubt contributed to this faith.

Out of those feeling more optimistic about their finances, 40% say that this is because they have “saved more than normal” recently.

Raheel Ahmed, Head of Consumer Products at Barclaycard, commented:

“Changing restrictions continue to have an impact on our spending habits – which was particularly acute across the high-street and hospitality sectors in December, with restaurants, pubs and bars hardest hit during a low-key festive season in the majority of the UK. As a result of further restrictions, online grocery spend surged and fuel declined as the majority cancelled their plans and stayed home for the holidays.  

“Additionally, many still continued to support their local shops where possible, spending more time in their local community. Small businesses have continued to remain agile to these changing consumer habits – with many going online for the first time. From dog walking services to subscriptions of weekly meal kits, small businesses are exploring new ways to reach their customer base.  

“With the latest government guidance to stay at home and a vaccine roll-out on the horizon, we are all hopeful of a brighter and more prosperous year ahead. Yet for now, the reality of lockdown life remains and it’s once more a hugely challenging time for high-street retailers as well as the hospitality, leisure and travel industries”.

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