UK households cut spending at fastest pace in almost five years, says Barclays

British households dramatically tightened their purse strings last month, recording the sharpest cutback in spending in almost five years. This significant slowdown, primarily observed in November, signals a growing apprehension among consumers, largely attributed to lingering economic uncertainties and the anticipation of the government's budget announcements.

UK Households Tighten Belts Amidst Economic Uncertainty

According to a comprehensive survey by Barclays, card spending across the UK plummeted by 1.1% year-on-year in November. This marks the most substantial decline since February 2021, painting a stark picture of cautious consumers holding back on non-essential purchases. The data underscores a broader trend of economic deceleration that has characterised the latter half of the year, leaving retailers and economists pondering the path ahead.

The prevailing sentiment of unease, often dubbed "pre-budget jitters," played a crucial role in dampening consumer enthusiasm. Months of speculation surrounding the Chancellor's fiscal plans, particularly ahead of the November 26 budget, created an environment of hesitancy. Opposition parties have been quick to attribute this dip in confidence to the government's handling of economic policy, with specific criticism directed at Rachel Reeves.

The Shadow of Black Friday: A Muted Boost

Black Friday, traditionally a pivotal moment for retailers, kicking off the festive shopping season with a flurry of deals and discounts, offered a mixed bag this year. While Barclays data indicated that retailers did experience their busiest day of the year so far, with transaction volumes soaring by an impressive 62.5% compared to an average day, the overall impact was less significant than anticipated.

• A Critical Trading Period: Black Friday has evolved into a crucial barometer for retailers, providing an early glimpse into consumer appetite for Christmas spending. It's a period where many businesses hope to make up for earlier slow sales.
• Diminished Lift: However, a joint report by the British Retail Consortium (BRC) and consultancy KPMG revealed that the usual Black Friday surge was considerably weaker this year. Shoppers, plagued by economic "jitters," approached the sales event with greater caution, leading to a less pronounced boost than retailers had hoped for.
• Underlying Caution: This suggests that while consumers were willing to engage with significant discounts, the underlying confidence to spend freely on discretionary items remained subdued, preventing a truly robust sales period.

Sectoral Performance: A Mixed Bag

The November spending data reveals a varied landscape across different retail sectors, highlighting where consumers are prioritising their limited budgets.

Struggles in Discretionary Spending

• Food Sales Propped Up Overall Figures: The BRC noted that overall sales were moderately ahead of last November, primarily propped up by increased spending on food. Food sales rose by 3% year-on-year. However, this growth was still below the average rate of inflation, which stood at 3.6%. This indicates that while consumers are still buying groceries, the volume of goods purchased might be stagnant or even declining, with higher prices driving the nominal increase.
• Non-Food Products Lag: In stark contrast, sales of other products, encompassing a wide range of non-essential goods, increased by a mere 0.1% year-on-year. This figure falls significantly short of the 12-month average growth rate of 1.6%, underscoring the severe squeeze on discretionary spending.
• Fashion's Woes: The fashion sector, in particular, experienced a tough month. Mild weather during the first half of November dampened demand for winterwear, a crucial category for this time of year. Beyond weather, fashion items are often among the first to be cut when household budgets are under pressure, reflecting a broader shift towards essential purchases.

The Shifting Landscape of Leisure and Lifestyle

The hospitality sector also felt the pinch. Barclays reported a 1.5% slowdown in pub spending in November. This decline is not just about reduced visits but also reflects changing consumer habits. A survey of 2,000 UK adults by Barclays revealed that a significant proportion of younger demographics are opting for more budget-conscious and health-conscious choices:

• Rise of Alcohol-Free Options: A notable 42% of those aged 18 to 34 reported choosing alcohol-free drinks.
• Embracing Sober Activities: Furthermore, 40% of this demographic opted for alcohol-free activities, indicating a broader cultural shift towards more mindful and potentially cheaper socialising options, especially amidst a cost-of-living crisis.

Bright Spots Amidst the Gloom

Despite the widespread cutbacks, a few sectors managed to defy the trend, demonstrating resilience and even growth:

• Travel Agents Soar: Travel agents enjoyed a significant Black Friday boost, with spending up 10.7%. This surge suggests that despite immediate spending cuts, many consumers are still prioritising holidays and experiences, perhaps booking future trips during sales events to secure better deals.
• Streaming Services Hold Strong: Spending on streaming services and subscriptions increased by 3.5%. The appeal of hit shows like "Stranger Things" and "Pluribus" continues to drive engagement, offering affordable entertainment options that provide significant value for money in challenging times.
• Homeware and Upholstery: As households prepared to host friends and family over the festive season, sales of homeware and upholstery performed well. This suggests a "nesting" trend, where people invest in making their homes more comfortable and inviting, especially if they are spending more time at home due to economic pressures.

Behind the Jitters: Economic and Political Headwinds

The underlying cause of this widespread consumer caution is multifaceted. Beyond the immediate impact of pre-budget speculation, broader economic indicators paint a picture of fragility:

• Subdued Economic Confidence: The Barclays study confirmed that confidence in the wider economy remained "subdued" throughout November. This overarching pessimism about the national economic outlook inevitably translates into a reluctance to spend.
• Marginal Improvement in Personal Finances: Interestingly, consumer confidence in their *own* finances improved marginally. This perhaps reflects a sense of personal resilience or effective household budgeting, but it doesn't translate into a willingness to spend more when the broader economic picture looks uncertain.
• Business Rates Pressure: Adding to the woes of the retail sector, the Chancellor has faced mounting pressure to review changes to business rates. Medium-sized retailers and pub chains, in particular, warn that these changes will hit them disproportionately hard, potentially leading to closures and job losses, further exacerbating economic anxieties.

The Monetary Policy Response: Interest Rate Expectations

In response to the visible slowdown in economic growth, coupled with rising unemployment figures and the persistent difficulties faced by high street retailers, the Bank of England is widely expected to take action. Analysts anticipate that the Bank's Monetary Policy Committee will cut interest rates from 4% to 3.75% when it meets later this month.

Such a move would be aimed at stimulating the economy by making borrowing cheaper for businesses and consumers, thereby encouraging investment and spending. However, the effectiveness of a marginal rate cut in overcoming deep-seated consumer caution remains a key question for economists and policymakers.

Expert Outlook: Navigating the Path Ahead

Leading economic voices have weighed in on the challenging landscape and the prospects for the coming year.

• Jack Meaning, Chief UK Economist at Barclays: Meaning observed, "Even with a boost from Black Friday, consumer spending remained muted as we moved through the final quarter of the year. 2025 has been defined by this economic deceleration." He posed a critical question for the future: "The question remains as to whether easing interest rates and falling inflation can offset this trend and spur a rebound in consumer spending, or whether tightening fiscal policy and continued uncertainty will see the malaise continue in 2026." His comments highlight the delicate balance between monetary easing and fiscal policy challenges.
• Helen Dickinson, Chief Executive of the BRC: Dickinson echoed the sentiment of disappointment, stating, "Pre-budget jitters among shoppers meant the month of Black Friday did not deliver as strongly as retailers had hoped or the economy needed." Looking ahead, she made a clear call to action for policymakers: "Looking ahead to 2026, it is time public policy started prioritising measures to revive consumer confidence and keep costs of doing business down so retailers can focus on growth strategies to maximise their contribution to economic recovery." Her plea underscores the urgent need for government intervention to create a more favourable environment for businesses and consumers alike.

As the UK navigates this period of economic uncertainty, the interplay between consumer confidence, government policy, and monetary decisions will be crucial in determining whether the current spending slowdown is a temporary blip or a harbinger of more prolonged economic challenges into 2026.