UK consumer spending rises sharply in February: surveys

© Reuters. FILE PHOTO: People walk along a busy shopping street as people look for bargains in the traditional Boxing Day sales in Liverpool, Britain, December 26 , 2021. REUTERS/Phil Noble

LONDON (Reuters) – People in Britain people spent heavily in February after COVID-19 restrictions were unwound, surveys showed on Tuesday, but the outlook for the months ahead looks darker as inflation surges.

Payment card provider Barclaycard said consumer spending was 13.7% higher than its pre-pandemic level in February 2020, the strongest reading since November and gathering pace from a 7.4% rise in January from two years earlier.

Outlays on luxury items, holidays and accommodation rose sharply while growth in supermarket spending slowed.

A narrower survey from the British Retail Consortium showed retail sales values were up 6.7% year-on-year, slowing from January’s 11.9% increase but remained buoyant.

“The strong uplifts across both retail and hospitality show that the nation is keen to make the most of life following the easing of Plan B restrictions,” said Jose Carvalho, head of consumer products at Barclaycard.

However, with inflation running at its highest rate since the early 1990s and set to top 7% soon, plus tax hikes due in April and the likelihood of higher interest rates, household budgets face a mounting squeeze on their spending power.

“The future is looking increasingly uncertain, with current demand unlikely to be sustained,” said Helen Dickinson, chief executive of the BRC.

“With households facing lower disposable income, discretionary spend will be one of the first things to feel the squeeze.”