UK shoppers slash spending as price rises and energy bills bite

Zara is to help its UK shoppers resell, repair or donate clothing bought from the Spanish fashion chain in an effort to reduce its environmental impact.

UK consumers sharply cut back their spending in February as soaring living costs damaged household finances, retailers have warned, despite strong sales of jewellery and fragrances for Valentine’s Day.

Highlighting the impact of the cost of living crisis on the economy before Jeremy Hunt’s budget next week, the British Retail Consortium (BRC) said sky-high energy bills and the rising cost of a weekly shop were forcing shoppers to cut back.

Total sales rose by 5.2% in February compared with a year earlier, up slightly from January’s annual growth rate of 4.2%. However, much of the rise was a result of high inflation pushing up the value of goods being sold, masking weaker sales volumes.

“Many consumers will be concerned as they prepare for further energy price and tax rises in April,” said Helen Dickinson, the chief executive of the BRC.

She warned Hunt that urgent steps were required in the budget to help retailers weather the economic storm without passing on large price increases to consumers.

“To protect people from ongoing price rises for goods, government must avoid additional regulatory costs on business that compromise retailers’ ability to invest in lowering prices and in other areas that would contribute to the UK’s economic recovery,” Dickinson said.

According to the latest snapshot of high street spending, price-sensitive consumers shopping around for Valentine’s Day gifts – including fragrance and jewellery – helped to prop up sales values in February. However, the volume of goods bought was down on a year ago.

Energy-saving appliances also continued to sell well, but the rush for warm coats and boots subsided after a splurge in the January sales fizzled out.

Separate figures from Barclays showed consumer card spending – which includes spending in shops but also on travel, hospitality and other services – rose by just 5.9% compared with a year ago, significantly below the annual inflation rate of 10.1%.

Barclays, which processes almost half of UK credit and debit card transactions, said the weakness in sales was because of a reduction in discretionary purchases thanks to the cost of living squeeze.

The figures were also affected by the lifting of plan B Covid restrictions in February 2022 – which led to a spike in spending because of pent-up demand – making it tougher to beat that level of spending in February 2023.

Card spend on clothing fell by 1.2% compared with the same month last year. Spending in restaurants dipped 3%, while pubs, bars and clubs experienced annual sales growth of 7.7%, significantly lower than the 18.1% annual growth rate in January.

According to a survey of 2,000 consumers on behalf of Barclays, more than two-thirds said they were looking for ways to reduce the cost of their weekly shop.

Almost half of these shoppers said they were cutting down on luxuries or one-off treats, while more people are switching to discount retailers and shopping around for deals.

Food shortages are also influencing grocery shopping habits, with half of consumers noticing that some supermarket shelves are considerably emptier than normal amid nationwide challenges with the supply of salad, tomatoes and eggs.

Paul Martin, the UK head of retail at KPMG, which helps to compile the BRC retail sales monitor, said: “Consumers are continuing to hold back on non-essential spending with sales of clothing, footwear and accessories – which have been very influential in spending for many months – continuing to decline in February.

“Furniture and homeware have been driving sales growth on the high street and online but we are starting to see more categories record negative sales year on year, as household budgets remain squeezed.”