UK consumer spending slowed in August even before tighter restrictions were imposed on much of the country.
Total debit and credit card spending in the UK dropped to £51.6bn ($68.3bn) in August, down 3.8% on the previous month and 14% on a year earlier. Transaction numbers were down 1.3% month-on-month to 1.2 billion.
Total spending by UK cardholders both in Britain and overseas also declined between July and August, according to new data from banking and finance trade body UK Finance.
Meanwhile many households continued to pay off credit card debts, in a notable trend to have emerged since lockdowns first hit household finances as well as heavily curbing spending opportunities earlier this year.
Outstanding balances on credit card accounts dropped 12.6% over the year to August, as repayments outstripped new borrowing amid heightened uncertainty
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July’s figures had marked a record high for debit card spending however, as consumers made the most of eased restrictions over the summer after the first nationwide lockdown.
Eric Leenders, managing director of personal finance at UK Finance, noted record numbers of customers had made contactless payments on debit cards, “taking advantage of the £45 contactless limit.”
He said debit card spending “remained strong” at £58.4bn despite a month-on-month decline.
Separate figures from Barclaycard (BARC.L) last month suggested consumer spending in fact continued to rise in September, attributed to a spike in back to school shopping and panic buying. Its most recent data showed spending tail off in October.
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Declines could indicate greater caution from households as infection rates edged higher, even before heavier restrictions were imposed on swathes of the country in more recent months.
It comes after a UK financial watchdog ordered lenders to offer credit card, personal loan and rent-to-own customers more time to apply for payment holidays as a crisis support measure.
The Financial Conduct Authority (FCA) said earlier this month as England went into lockdown that a 31 October deadline for struggling individuals to apply for payment holidays had been extended.
Those who have not had a payment holiday before can request one for up to six months, in a similar move to measures announced for mortgage borrowers. Another support measure, interest-free £500 overdrafts, were not extended, however.
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