The spending of consumers in the UK witnessed its fastest growth in nearly two years last month, providing a boost that affects the need for economic morale, according to two major polls in the industry.
The British Federation (BRC) reported that retail sales increased by 2.6 percent year on year in January, increasing the growth of 1.2 percent registered in the same month last year. Meanwhile, the Parklik data showed a 1.9 percent increase in credit and discount cards over the same period – the highest since March 2024 – although it remained less than the inflation rate by 2.5 percent.
Encouraged, estimated spending increased by 2.7 percent, indicating that consumers have begun to reduce their wallet chains after continuous wages growth. Nevertheless, home savings rates are still higher than prenatal levels, indicating the remaining caution.
Food sales, which increased by 6.1 percent in January 2023, grew at a significantly slower rate of 2.8 percent this year, while spending on home commodities, health products, beauty and digital subscriptions helped pay the total retail performance.
The high spending on consumer comes amid the increasing economic uncertainty. Last week, the Bank of England reduced the growth forecast for GDP of 2025 from 1.5 percent to only 0.75 percent and reduced interest rates to 4.5 percent in an attempt to support the economy.
Helen Dickenson, CEO of BRC, noticed that shoppers had been withdrawn to seasonal discounts on furniture, bedding and home accessories, which enhances sales in the main retail sectors. However, they have warned that companies are facing increasing financial pressure, especially with a rise of 6.7 percent in April in the minimum wage and an increase of 25 billion pounds in national insurance contributions to employers.
“Many companies will be left with a significant choice but to increase prices and reduce investment in jobs and stores,” said Dickenson. The Bank of England also warned that companies are preparing for lower profit margins due to the high cost of employing low -wage employees, which are expected to increase by 5 percent.
Despite these challenges, spending has been on entertainment and hospitality. BarclayCard recorded a 2.6 percent increase in spending in bars, bars and restaurants in January, even when a third of consumers chose to reduce alcohol consumption.