United Kingdom

UK consumer spending falls sharply as lockdown bites

Today News || UK News

UK consumer spending fell sharply in early January as coronavirus restrictions were tightened, registering a much bigger fall than during the second lockdown in November, according to a new data set that points to a shrinking of the economy at the start of the year.

Spending in the seven days to January 14, the first full week of the third lockdown in England, fell 35 per cent compared with pre-pandemic levels, with a similar fall in the first week of 2021 reflecting fresh curbs over the Christmas period.

The sharp drop was revealed in Bank of England figures on credit and debit card spending released by the Office for National Statistics on Thursday, which use February 2020 data as its base.

The data set tracks the value of Clearing House Automated Payment System (Chaps) payments by large UK companies from their credit and debit card processors.


The experimental data is not adjusted for seasonality or inflation. It is an attempt by statisticians to find ways to ensure real-time monitoring of the economy to enable policymakers to react rapidly to the disruption caused by the pandemic as official data is published with a considerable time lag.

The impact of the tighter restrictions was also reflected in a fall in consumer confidence at the start of the new year. The GfK consumer confidence index dropped to minus 28 in the first two weeks of January, down 2 points on last month and all but reversing gains in December spurred by the approval of the first coronavirus vaccines.

RELATED:  ‘Weakest defence of the UK yet’: SNP and Labour MPs clash on BBC interview

“Despite the widespread anticipation of a ‘return to normal’ with the ramp-up of the vaccination programme, it is too early to deliver a jolt in the arm to UK consumer confidence,” said Joe Staton, GfK’s client strategy director.

The fall in the Chaps data was much bigger than the 14 per cent in November — when England was put into its second lockdown — compared with the February average. Official data last week showed that the UK economy shrank for the first time in six months in November.

“The data tie in with our view that the economy is going to be hit appreciably more by lockdown and restrictions in Q1 2021 than it was in Q4 2020, but the decline in activity will still be nothing like it was in Q2 2020,” said Howard Archer, chief economic adviser to the EY Item Club. He forecast a fall in GDP in the first quarter of 3 to 4 per cent compared with the final three months of 2020.

Yael Selfin, chief economist at consultancy KPMG, said the data underlined the impact of the new lockdown but believed the vaccination programme could offset the damage. She said there was “a potential for spending to pick up quite strongly in Q2 once the vulnerable groups are vaccinated and restrictions are gradually lifted”.

Line chart of Index showing UK consumer confidence fell in the first half of January

Consumer spending was one of the main drivers of the economic recovery in the third quarter of 2020 as restrictions eased.

RELATED:  Landlord of 'wet' south London pub manages to bypass Tier 2 with 'instant meals'

Paul Dales, chief UK economist, at Capital Economics, welcomed the new data set but warned that it might overstate the extent of spending as the pandemic had triggered a shift away from cash.

In the first half of January, spending halved for transactions the ONS labels “delayable”, such as clothing or furnishings. This is a much sharper fall than the minus 27 per cent of mid- November.

Work-related spending, including categories such as public transport and fuel, fell by more than 40 per cent.

In contrast spending on “staple” or essential goods, such as food and utilities, was above last February’s levels, reflecting a continuing trend as people spend more time at home.

The new nationwide lockdown rules in England

  • The main restriction is a firm stay-at-home message

  • People are only allowed to leave their home to go to work if they cannot reasonably do so from home, to shop for essential food, medicines and other necessities and to exercise with their household or one other person — once a day and locally

  • The most clinically vulnerable have been asked to shield

  • All colleges and primary and secondary schools are closed until a review at half-term in mid-February. Vulnerable children and children of critical workers are still able to attend while nursery provision is available

  • University students have to study from home until at least mid-February

  • Hospitality and non-essential retail are closed. Takeaway services are available but not for the sale of alcohol

  • Entertainment venues and animal attractions such as zoos are closed. Playgrounds are open

  • Places of worship are open but one may attend only with one’s household

  • Indoor and outdoor sports facilities, including courts, gyms, golf courses, swimming pools and riding arenas, are closed. Elite sport, including the English Premier League, continues

  • Overseas travel is allowed for “essential” business only 

RELATED:  Ten years on from revolution, Libya needs global support

Full details are available on the government’s official website.

UK news Today Latest stories & updates More Headlines

Today News Post || UK News || World News || US Updates || Trending News || Technology News || EU News


Show More

Related Articles

Back to top button