Summer boost for hospitality but cost-of-living concerns loom

Hospitality benefitted from the warm weather and summer holidays as Brits flocked to pubs and enjoyed staycations last month.

Data from Barclaycard, which sees nearly half of the nation's credit and debit card transactions, saw spending on essential items grow 7.2% year-on-year – its highest growth since December 2021 (8.9%).

Overall card spending declined -1.9% month-on-month, as consumers became more selective with discretionary purchases to ensure they can afford rising household bills.

Restaurants and bars, pubs and clubs enjoyed a reprieve in August, rising 6.6% and 8.4% respectively; while the domestic travel sector also performed strongly, with summer staycations boosting hotels, resorts and accommodation by 4.1% month-on-month.

However, more than one in 10 (13%) workers were choosing to walk or cycle to work instead of driving due to rising fuel costs, and a similar number (11%) started to commute by public transport.

Average spending on utility bills was up 45.2%, greater than the growth seen in July (43.9%) and June (39.6%) this year. Higher prices led 93% of consumers to feel concerned about household bills, with 45% of this group also reducing energy consumption at home to help combat increasing costs.

Concerningly, 28% felt their personal finances were not sufficient to cover their energy costs, and looking ahead, this rose to (39%) when factoring in the upcoming energy price rise in October.

Spending on non-essential items grew 3.6% year-on-year – the lowest growth since February 2021. As a number of categories saw declines, Brits admitted to being more selective about their discretionary purchases, with 31% assessing every individual purchase amid the cost-of-living squeeze.

Brits' confidence in their ability to spend on non-essential items fell to 48%– noticeably lower than July 2022 (54%) and August 2021 (63%). Optimism in the UK economy also declined to 21%, down from 26% last month and 37% in August 2021; its lowest since August 2020 (19%).

The energy price increase in October was also weighing on consumers' minds, with 32% planning to cut down on discretionary spending to afford energy bills during the autumn and winter and 21% reporting they could no longer afford small luxuries as a ‘pick-me-up'. Many felt the worst was yet to come, as 82% believed the cost-of-living would continue to rise, while 20% cited increasing costs as having a negative impact on their mental health.

Despite the challenging outlook and ongoing headwinds, 60% of consumers remained confident in their household finances, albeit down on last month's 66%. This relative stability may be owing to changes many have made to their spending behaviour to offset rising costs (26%) in preparation for the months ahead.

José Carvalho, head of consumer products at Barclaycard, said: "The cost-of-living is clearly leading Brits to cut-back on some non-essential purchases to ensure they can afford the increasing costs of their weekly grocery shop and household utility bills. Yet, despite these inflationary pressures, consumers have still been keen to enjoy the summer weather by eating and drinking out and going on staycations with friends and family.

"However, an energy price rise on the horizon means the majority are understandably very concerned about whether their finances can stretch far enough to afford rising household bills. Many Brits plan to continue cutting back on their discretionary spending during the autumn and winter, while adopting a resourceful approach to saving money in order to weather a challenging period ahead."

Makala Green, financial expert and author, said: "The current cost-of-living crisis is arguably the biggest squeeze on living standards in decades. While it's encouraging that many Brits have enjoyed the last of summer by going on staycations and supporting pubs and restaurants, the winter months ahead will place new pressures on personal finances and budgeting.

"It's going to be incredibly important for those really feeling the pinch to pay extra close attention to their outgoings. A simple but effective way to do this is to start by reviewing and readjusting your monthly budget – at the beginning of each month, write down the cost of your essential expenses like your rent or mortgage and bills, then review all other expenses to ensure you are not overspending or paying for things you no longer need."