Annual consumer spending in the UK has suffered its worst start since 2012, according to a study by Visa.
The Visa UK Consumer Spending Index shows that households’ spending suffered a 1.1% year-on-year fall in February, following a 1.2% dip in January.
High street spending down
For the tenth consecutive month, face-to-face high street spending dropped annually, with a 2.5% decrease. However, online spending increased slightly compared to the previous year, with a 0.2% upturn.
Recreation and culture spending also dropped 6.1% year-on-year in February – the biggest fall since April 2010 – while spending fell on clothing and transport, communication, footwear and household goods.
Mark Antipof, chief commercial officer at Visa, said: “Britons have been in belt-tightening mode since last summer. February’s cold snap certainly didn’t alleviate this situation, particularly when we shine a spotlight on high street spending, and recreation and culture in particular, which saw its biggest decline since April 2010.
Spending on bars, hotels and restaurants has been more positive than other sectors with spending up by 4.4% year-on-year.
“The resilience of this sector is somewhat unique, having reported uninterrupted growth since February 2011,” said Antipof.
He added: “As we look ahead into March, consumer spending is at risk of posting one of the worst Q1 results on record. Retailers will no doubt be hoping that the milder weather will put a spring in shoppers’ steps.”
Annabel Fiddes, principal economist at IHS Markit, said: “The latest Visa UK CSI data pointed to a further modest reduction in consumer spending in February, with expenditure down -1.1% compared to a year ago. The high street remained a key source of weakness, seeing spend fall for the tenth month in a row, while growth in ecommerce spending continued to disappoint.
“Rising living costs, lacklustre wage growth and relatively subdued consumer confidence are all likely playing a part in the ongoing reduction in household spending. Unless the squeeze on incomes subsides, it looks unlikely that household spending will pick up anytime soon.”
Philip Briffett, senior director of partnerships at VoucherCodes, believes the results of Visa’s study will make for “bleak reading for UK retailers who need to encourage consumers to get spending with them for the remainder of the quarter, or run the risk of not meeting targets”.
The upcoming bank holidays will be a great opportunity for UK retailers to capitalise on bringing back some of these sales and reaching those consumers looking for an Easter bargain, he explained.
He added: “An omnichannel approach will be key to achieving this, brands need to ensure their online and offline experiences are working together to increase overall sales figures.
“Unlike the traditional Christmas sales period, shoppers over the Easter weekend will not necessarily be heading to the high streets to browse – making it vital that brands provide the experience their shoppers will be expecting. That means a seamless online/offline experience, competitive prices and the use of data to create relevant, personalised information – this will all be key to converting sales.
Visa’s index uses spending on Visa cards as a base and then adjusts the figures to reflect all consumer spending, not just that on cards.