Market Analysis

According to studies, UK consumer expenditure is rising faster than the annual budget

Amos Simanungkalit · 08 Oct11.6K Views

British shoppers moderately increased their spending in annual terms last month, despite concerns over potential tax hikes in finance minister Rachel Reeves' upcoming budget and an impending rise in household energy bills, according to a survey released on Tuesday.

The British Retail Consortium reported that retail spending grew by 2.0% year-on-year in September, marking the strongest increase since March, when it rose by 3.5%. However, this was lower than the 2.7% recorded in September 2023.

Reeves, who assumed office in July following the Labour Party's landslide election victory, is scheduled to deliver her first annual budget on October 30. While she has indicated that some taxes will go up, she has ruled out increases to income tax rates and National Insurance contributions.

"With energy prices rising again, attention now shifts to the budget and how it might impact household discretionary spending in the year's final quarter," said Linda Ellett, UK head of consumer, retail, and leisure at KPMG, which sponsors the survey.

Regulated energy tariffs went up by 10% on October 1, pushing the typical annual household energy bill to £1,717 ($2,244).

A separate survey by Barclays, also published on Tuesday, revealed a 1.2% year-on-year increase in spending on its credit and debit cards in September, the highest rise since April, following a 1.0% increase in August.

In real terms, however, this represents a decline, as UK consumer price inflation remained at 2.2% in September, slightly above the Bank of England's 2% target.

Official retail sales data for August showed a 2.2% rise in sales value and a larger-than-expected 1.0% increase in sales volume.

Barclays noted that spending on discretionary items last month saw the highest growth since June, with entertainment expenditure surging by 14.4%—the biggest increase since July 2023, when U.S. singer-songwriter Taylor Swift's UK tour ticket sales opened.

The entertainment spending boost in September was driven by ticket sales for the British rock band Oasis, which is reuniting after a 15-year hiatus.

Conversely, spending on essential items saw the steepest decline since April 2020, at the height of the COVID-19 pandemic. Notably, grocery spending fell for the first time since June.