The UK’s credit and debit card spending saw minimal growth in 2024, revealing a cautious consumer base prioritizing experiences over big-ticket items. This trend presents a potential challenge to the Labour government’s economic growth objectives. A Barclays report analyzing card transactions indicates a shift in consumer behavior, with spending on essentials like groceries and fuel rising by a mere 0.9% in 2024, compared to 3.9% in the previous year.
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Consumers Prioritize Experiences and Small Luxuries
This slowdown in essential spending reflects a broader trend of “conscious consumerism,” where individuals are more selective with their purchases. While cutting back on necessities, consumers continue to indulge in smaller luxuries, entertainment, and travel, demonstrating the “lipstick effect” – seeking affordable indulgences during economic uncertainty. High-profile events like Taylor Swift’s Eras Tour contributed significantly to the resilience of non-essential spending.
Image of a concert crowd
Barclays’ head of retail, Karen Johnson, suggests this trend will likely persist into the new year, with entertainment remaining a key driver as consumers redefine their “essential” spending.
Economic Concerns Despite Rising Incomes
The cautious spending patterns emerge despite increasing real incomes and lower borrowing costs, highlighting the challenges faced by Prime Minister Keir Starmer and Chancellor Rachel Reeves in stimulating economic growth. While the October budget alleviated concerns about tax increases, anxieties surrounding potential job losses, economic stagnation, and rising inflation in 2025 persist.
Savings Increase, Non-Essential Spending Habits Evolve
Consequently, households are saving a larger portion of their income, pushing the savings rate above historical averages. Barclays’ research indicates that nearly half of UK consumers are cooking more at home to save money, and a significant portion have participated in or are considering “no-spend challenges,” foregoing expenses like takeout, coffee, and clothing.
Image of someone cooking at home
This shift in spending priorities highlights the growing importance of travel and entertainment as new essentials. While consumers continue to seek discounts on groceries, a significant percentage admit to overspending on holidays. Furthermore, despite rising streaming subscription costs, few Britons looking to reduce discretionary spending plan to cut back on this category.
Looking Ahead: Navigating Economic Uncertainty
The evolving spending habits of UK consumers underscore a complex economic landscape. The trend toward prioritizing experiences and small luxuries while cutting back on essentials presents both challenges and opportunities for businesses and policymakers. As we move into 2025, understanding and adapting to these evolving consumer preferences will be crucial for navigating economic uncertainty and fostering sustainable growth. The continued emphasis on experiences suggests a potential bright spot for the entertainment and travel sectors, while businesses reliant on consumer spending on big-ticket items may need to adjust their strategies.
