The latest Barclaycard Consumer Spending Report – an in-depth look at the country’s spending patterns and confidence levels – reveals spend growth hit a three-year high of 4.5 per cent in the second quarter of the year.
Wage growth, higher employment and low inflation combined to boost consumer confidence and drive spending on leisure and non-essential items.
In the last quarter, spending on travel grew by 8.4 per cent – its highest level since the second quarter of 2013 – with spending on hotels rising 6.9 per cent and on airlines by 4.1 per cent. This growth looks set to continue as 43 per cent of UK consumers say that they are more likely to holiday in Europe this year to take advantage of the weaker euro.
However, the on-going question mark around Greece’s future in the eurozone is impacting some of that optimism. Confidence in the European economy has fallen three percentage points in the past week to 18 per cent, according to specific research carried out by Barclaycard after the result of the Greek referendum was known3.
As a result of this economic uncertainty in the Eurozone, and some doubts around the security of holidaying abroad, a quarter (26 per cent) of holidaymakers are opting for a UK staycation instead this summer. Those who still plan to head overseas are favouring Spain (23 per cent), the USA (12 per cent) and Italy (9 per cent) the leading choices.
Leisure spending, and wider ‘non-essential spend’ such as household furniture and in DIY stores, grew strongly as increasing confidence saw consumers splash out on leisure time and the home. Restaurants and pubs saw double-digit growth of 14.8 per cent and 12.1 per cent respectively, whilst spend in furniture stores reached a three-year high of 7.4 per cent. Home improvement and DIY stores saw growth of 5.2 per cent.
The decisive result of the General Election also had a positive impact, with almost a third (32 per cent) of consumers saying the result has buoyed their confidence in the UK’s economic future.
Chris Wood, Chief Operating Officer, Barclaycard said:
“A decisive General Election, low inflation, an uptick in earnings and improving job security all contributed to a sense of financial wellbeing among consumers in the second quarter, which in turn led to record growth in both overall and discretionary spending.
“With the UK’s economic prospects continuing to improve, and as consumers look forward to the summer ahead, spending on entertainment and leisure, large household purchases and overseas holidays was up strongly. With the strength of sterling against the euro making everything from short city breaks to two-week beach getaways more cost-effective, we expect this trend to continue into the third quarter.
“Rather than a fleeting trend, consumer spending has been growing steadily since last summer as more and more people started to believe that improvements in the macro environment were here to stay. With the UK’s economic recovery appearing now to be firmly established, households are likely increasingly to spend more on themselves and their families.”
The encouraging economic figures are being seen across the country. Spending rose in every region in the UK, with the biggest rises witnessed in London (5.4 per cent), the North West (4.9 per cent) and Scotland (4.7 per cent). Even at the lower end of the scale, spending in the North East, East of England and South West still increased by 3.9 per cent, 3.8 per cent and 3.7 per cent respectively as consumers across the UK felt the effects of rising wages and falling inflation.
Barclaycard processes over 40 per cent of the 1.04bn retail credit and debit card transactions made in the UK every month, giving it unrivalled insight into how consumers across the country are spending.
- Consumer spending grows 4.5 per cent year-on-year in second quarter – the highest in three years, June alone sees growth of 4.9 per cent
- Spending on travel up 8.4 per cent with Spain, the USA and Italy benefitting from uncertainty around Greece and security concerns
- Spending in restaurants and pubs sees double digit growth – 14.8 per cent and 12.1 per cent respectively