UK consumers slowed spending as COVID rules returned in January, Retail News, ET Retail

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LONDON: British consumers slowed the pace of spending last month as the Omicron COVID-19 wave hit fuel sales and kept people away from bars and restaurants, a survey found that also highlighted the impact of the rise in inflation.

Consumer spending was 7.4% higher than in January 2020 – before the pandemic – the smallest increase since April last year, payments provider Barclaycard said.

He said nine out of 10 people surveyed felt their household finances and discretionary spending were affected by the recent price spike.

Britain’s inflation rate hit a 30-year high of 5.4% in December and is expected to reach 7% in April, according to the Bank of England which last week raised interest rates for the second time in two months and said further increases were likely.

Jose Carvalho, head of consumer products at Barclaycard, said there were signs of relief for the hospitality industry, with people saying they expected to spend more on food and drink in the coming months.

“The lifting of Plan B restrictions should also provide a welcome boost to many sectors, as workers return to the office and socialize over drinks after work, while businesses are likely to start to see the benefits of the increase in inbound tourism also affects retail sales,” he said.

Work-from-home advice, along with rules on mask-wearing and vaccine passes, was lifted in England on January 26, six weeks after they were introduced.

A separate survey released on Tuesday suggested a brighter picture for retailers – a narrower measure of consumer spending.

Sales rose 11.9% in January from the same month last year, the biggest increase since May last year, the British Retail Consortium said.

Many non-essential retailers were closed in January 2021 – although this year’s figure was still 7.5% higher than January 2020 – and part of the increase in sales figures was due to the surge in inflation, BRC said.

Furniture sales were particularly strong last month as transport delays eased.

Paul Martin, head of UK retail at KPMG, which co-produces the BRC figures, said retailers hoped consumer confidence would remain strong to help offset rising costs.

“We could see a tough few months ahead if broader macroeconomic conditions start to squeeze household incomes to the point that they start to cut retail spending,” Martin said.

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