Summary:
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UK consumer spending fell sharply in December
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Barclays card data shows biggest drop since 2021
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Retail sales growth slows to weakest pace since May
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Shoppers delayed purchases awaiting discounts
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Outlook hinges on inflation easing and BoE cuts
UK consumers pulled back sharply on spending in December, adding to signs that household caution intensified into year-end as worries over taxes, inflation and the economic outlook weighed on sentiment.
Debit and credit card data from Barclays showed overall consumer spending fell 1.7% year on year in December, a deeper contraction than November’s 1.1% decline and the largest drop since February 2021, during the COVID pandemic. Spending on essential items declined for an eighth consecutive month, underlining persistent pressure on household budgets.
Separate figures from the British Retail Consortium painted a similarly subdued picture. Total retail sales rose just 1.2% y/y in December, down from 1.4% in November and marking the weakest growth since May. Like-for-like sales increased only 1.0%, also the softest pace in seven months, as shoppers delayed purchases in anticipation of post-Christmas discounts.
Barclays said consumer caution was exacerbated by concerns over potential tax rises flagged in the recent budget by UK finance minister Rachel Reeves, alongside lingering inflation anxiety and a slowing economy. More than half of consumers surveyed said they plan to cut spending on food and discretionary items in 2026.
Retail detail highlighted a widening split. Food sales rose 3.1% year on year, but the BRC said this increase was largely driven by higher prices rather than volumes. Non-food sales were almost flat, with fewer Christmas gifts sold than expected, reinforcing evidence of weak discretionary demand. Major retailers, including Sainsbury’s, have already flagged soft non-food performance over the holiday period.
Despite the bleak December data, Barclays said there are tentative reasons for optimism. Chief UK economist Jack Meaning said inflation is expected to ease significantly in the first half of 2026, and further interest-rate cuts from the Bank of England could eventually restore real spending power.
For now, however, the data suggest UK consumers ended 2025 “with a whimper,” leaving growth momentum fragile heading into the new year
