British holidaymakers are tightening their belts for the first time in half a decade. New data from Barclays shows travel spending fell last month as households braced against a new wave of cost-of-living pressures and the economic shockwaves caused by the Iran conflict.
Spending on card payments rose a modest 0.9 percent overall in March compared to a year earlier, slightly less than February’s 1 percent rise, according to the high street lender’s latest consumer spending report. But it was the travel sector that made the most striking turnaround: spending on vacations and travel fell 3.3 percent, marking the first annual decline recorded by Barclays since March 2021, when the pandemic was still gripping the country.
The decline will be an unwelcome shock to an industry that has enjoyed a sustained post-COVID boom fueled by consumers’ well-documented desire to value “experiences” over material goods. Spending at travel agencies fell by 4.6 percent, airline spending fell by 4.1 percent and public transport revenue fell by 2.9 percent. The only bright spot was domestic hospitality, with hotels, resorts and other accommodation businesses recording a 1.2 percent increase as Brits opted to stay closer to home over the Easter holidays.
The ongoing Middle East conflict, which erupted in late February following US and Israeli attacks on Iran, is reverberating across Britain’s high streets. Barclays has found that one in seven adults have either put off a major purchase or started throwing away cash in anticipation of higher energy costs this summer.
Consumers were given a short reprieve at the meter: Ofgem reduced the energy price cap by 7 percent from April 1st. However, the regulator has already reported an 18 percent increase from July as wholesale costs, fueled in part by geopolitical instability, impact household bills.
The essence is once again the crux of the matter. Spending on food and gasoline rose slightly by 0.5 percent, with a 1.6 percent increase in fuel spending marking the first increase since February 2023 as rising crude oil prices drive up gas pump costs. Discretionary spending growth cooled to 1.1 percent, although apparel (up 3.6 percent) and entertainment (up 3.5 percent) continued to hold their own. Box office revenue rose 5.5 percent, with Ryan Gosling’s “Project Hail Mary” and Pixar’s “Hoppers” drawing audiences back to the big screen.
Jack Meaning, chief UK economist at Barclays, said the data pointed to an impending slowdown. “That shoppers are delaying major purchases and building a savings buffer in response to the Middle East shock reinforces our view that activity will be subdued in the coming months,” he said. With the Bank of England’s interest rate decision due in less than three weeks, Meaning argued that Threadneedle Street’s best course of action would be to keep interest rates stable and “contain the worst of inflation without putting undue pressure on consumers.”
Despite the storm clouds, sentiment at household level is proving to be robust. Around 67 percent of adults remain confident in their personal finances and 71 percent are confident that they can live within their means. However, the gloomy mood deepens as consumers look outward: just 21 percent express confidence in the UK and global economies, down from 25 percent and 24 percent respectively in February.
Karen Johnson, head of retail at Barclays, said the figures showed a gap between sentiment and behavior. “Concerns about the cost of living and economic uncertainty continue to weigh on confidence, leading to caution and a desire to cut back, but spending remains stable in several categories, namely clothing, entertainment and digital content and subscriptions,” she said. She added that households were performing a “continuous balancing act” – cutting where they could while still investing money in essentials.
A parallel report from the British Retail Consortium painted a rosier headline picture: British retail sales rose 3.6 percent year-on-year in March, well ahead of the 1.1 percent growth a year earlier and above the 12-month average of 2.6 percent. This figure is due to a 6.8 percent increase in food sales.
BRC chief executive Helen Dickinson praised the timing of Easter. “An early Easter gave food sales a much-needed boost as families got together over the long weekend,” she said. “Non-food performance was more uneven: demand for computers, toys and household goods was robust, but clothing and footwear continued to struggle.” The turmoil in the Middle East, she added, has also impacted the coffers of retailers that sell travel goods.
For SME operators in hospitality, leisure and retail, the message from the March figures is mixed but telling: British consumers are still willing to spend money – albeit increasingly on their own doorstep and with an eye firmly on what July’s energy bills might bring.
