UK Consumer Spending Surges to Highest Level in Two Years as Economic Recovery Takes Hold

British consumer spending has reached its fastest growth rate in two years during January, offering a glimmer of hope for the UK’s sluggish economic performance, according to two authoritative surveys.

The British Retail Consortium’s research reveals retail sales jumped 2.6 per cent year-on-year in January, more than doubling the 1.2 per cent growth recorded in the same period last year. This marks the most robust increase observed since early 2023.

Barclaycard’s parallel study indicates credit and debit spending rose by 1.9 per cent annually in January, reaching levels unseen since March 2024. Though notable, the increase remains below the current inflation rate of 2.5 per cent.

Non-essential spending demonstrated particular strength, rising 2.7 per cent, suggesting consumers are leveraging substantial wage increases from the previous year. This shift in spending patterns emerges after two years of rising household disposable income without corresponding consumption growth.

Food retail experienced a 2.8 per cent uptick, though this represents a significant decline from the 6.1 per cent growth recorded the previous year. The hospitality sector showed resilience, with spending in pubs, bars and restaurants increasing by 2.6 per cent, despite a third of consumers reporting reduced alcohol consumption.

British Retail Consortium Chief Executive Helen Dickinson noted strong consumer interest in home improvements, with shoppers taking advantage of substantial discounts on furniture and home accessories. However, she warned of potential price increases and reduced investment in jobs due to the upcoming 6.7 per cent minimum wage rise and £25 billion increase in employers’ national insurance contributions.

The Bank of England’s recent decision to reduce interest rates to 4.5 per cent and halve its 2025 GDP growth forecast to 0.75 per cent underscores the significance of this consumer spending boost for the broader economic recovery.