British tourists are tightening their belts for the first time in half a decade, with new data from Barclays revealing that travel costs fell back to last month as households face a new wave of rising living costs and economic shocks from the Iran conflict.
Credit card spending rose 0.9 percent year-over-year in March, down from February’s 1 percent increase, according to the latest consumer spending report from top lenders. But it was the tourism sector that delivered the most surprising change: spending on holidays and travel fell by 3.3 percent, marking the first annual decline recorded by Barclays since March 2021, when the pandemic still gripped the country.
The move back will come as a surprise to an industry that has enjoyed a long post-Covid boom, fueled by consumers’ well-documented desire to prioritize “experiences” over physical goods. Spending by tourism operators fell by 4.6 percent, flights fell by 4.1 percent and public transport receipts fell by 2.9 percent. One bright spot was domestic hospitality, with hotels, resorts and other accommodation providers posting a 1.2 per cent rise as Britons opted to stay closer to home over the Easter break.
The ongoing conflict in the Middle East, which erupted in late February following US and Israeli strikes on Iran, is once again on Britain’s high street. Barclays has found that one in seven adults have delayed major purchases or started spending money in anticipation of higher energy costs this summer.
Consumers have been given a short break on the meter: Ofgem has reduced the price of energy by 7 per cent from 1 April. However, the regulator has already flagged an 18 percent jump since July, as wholesale spending, weighed down by the country’s instability, reaches household debt.
The key has once again become a pinch point. Spending on food and fuel rose 0.5 percent, while fuel consumption rose 1.6 percent, marking the first increase since February 2023 as rising crude prices pushed up court costs. Growth in discretionary spending slowed to 1.1 percent, although clothing (up 3.6 percent) and entertainment (up 3.5 percent) continued to hold their own. Cinema take was up 5.5 percent, with Ryan Gosling’s Hail Mary Project and Pixar’s Hoppers drawing audiences to the big screen.
Jack Meaning, chief UK economist at Barclays, said the data pointed to a softer spell ahead. “Consumers delaying large purchases and building up cash reserves due to shocks from the Middle East reinforce our view that activity will be muted in the coming months,” he said. With the Bank of England’s decision due in less than three weeks, Threadneedle Street’s best course of action will be to keep rates steady, “containing the worst of inflation without unduly squeezing consumers”.
Despite the vicissitudes of the storm, the family’s situation seems strong. Some 67 percent of adults remain confident in their finances and 71 percent in their ability to live within their means. The gloom deepens, however, when consumers look abroad: only 21 per cent express confidence in the UK and the global economy, down from 25 per cent and 24 per cent respectively in February.
Karen Johnson, head of retail at Barclays, said the figures highlighted the difference between sentiment and behaviour. “The cost of living worries and economic uncertainty continue to slow down confidence, which creates caution and the desire to cut back, but spending remains strong across several categories, namely clothing, entertainment and digital content and subscriptions,” he said. Families, he added, were doing a “constant balancing act” — cutting back where they could while still talking about what was most important.
The same report from the British Retail Consortium painted a rosier headline picture, with UK retail sales rising 3.6 per cent year-on-year in March, ahead of the 1.1 per cent growth recorded last year and above the 12-month average of 2.6 per cent. This figure was boosted by a 6.8 percent increase in food sales.
Helen Dickinson, chief executive of the BRC, praised the Easter season. “Easter morning gave a much-needed boost to food sales as families gathered for the long weekend,” she said. “Non-food performance was more uneven: demand was strong for computers, toys, and household items, but clothing and footwear continued to struggle.” The unrest in the Middle East, he added, has also damaged the shelves of retailers selling travel-related goods.
For SME operators in tourism, leisure and retail, the message from March’s numbers is mixed but instructive: British consumers are still willing to spend – but increasingly at home, and with one eye firmly on what July’s energy bills could bring.
