The ‘cost of living crisis’

Published June 2022

There’s no denying that financially, times are tough for many people in the UK. With virtually every news bulletin talking about rising energy prices, increasing inflation, and supply chain bottlenecks, it’s only to be expected that consumers’ spending habits have changed – and will continue to do so.

How things are changing

From January through to June this year, two-thirds (66%)* of people in the UK have said their disposable income has decreased due to the current increase in cost of living. With more than two-fifths (41%) saying they have spent less on non –essential items in the same period**.

In June, spending on essential items grew by 4.4%, largely due to petrol and diesel prices continuing to climb – a significant 24.8% surge in fuel spend***. Rising energy prices meant 44 per cent of Brits have had to cut back on their energy and water consumption to look for ways to save money*.

Additionally, during that period, shoppers have cut back on some of their monthly outgoings. Spending on household goods has dropped compared to May 2022 (-5.1 per cent), with home improvements and DIY as well as furniture stores seeing month-on-month declines of -7.4 per cent and -2.7 per cent respectively, as consumers held-off purchasing certain discretionary items, suggesting that shoppers are reducing spend on bigger-ticket items as living costs rise***.

91 per cent of UK consumers are concerned about the negative impact of rising household bills on their personal finances. In addition, confidence in the future of the UK economy has decreased slightly to 25 per cent, down from 27 per cent in May*.

The pandemic effect

The whole economy began to change as everyone’s lives were dramatically affected by the pandemic -people appear to be travelling less, as many are still working from home, and socialising with friends might not be as it once was.

The past two years of the pandemic have certainly changed the way many of us shop, and retailers have had to adapt in order to remain competitive in an unpredictable market.

Two years on we may have thought things would have gone back to normality, however Covid is still amongst us and has certainly impacted the UK economy as we are now in the midst of a cost of living crisis.

What this means for retailers

It’s clearly a difficult time for both consumers and retailers. Businesses still need to operate and grow in these uncertain times. Therefore, it could be beneficial to a retailer to best understand their customers’ challenges and needs – and can respond quickly and effectively with helpful and economically sensible solutions.

Richard Brassey, Head of Business Partnerships comments: “UK shoppers have clearly adjusted their spend on non-essential items to ensure they can factor in the increases on fuel and energy prices. Consumers are balancing out some of their spending, but they are still spending.

“Retailers have gone through a difficult few years, but many have adapted and survived. They need to do the same now and investing in technology, customer data and offering their customers options when it comes to how they pay for necessity items, could be great ways that make them stand out from the crowd.”

Being a responsible lender and putting your customer first

It’s therefore more important than ever to make sure what you’re offering your customers is manageable for them. If a customer needs to make that purchase – especially bigger ticket items– retail finance could be a great way that they could spread the cost of the purchase in manageable monthly amounts. It’s paramount that partnering with a responsible lender is prioritised and customer’s affordability is taken into consideration. This applies not only at the point of purchase, but throughout the entire course of the loan.

Retail finance could give customers the ability to buy what they need, by thinking about their monthly budget and what they can afford. It offers the flexibility and time to research their upcoming purchase, taking into account all the factors that matter. It means you’re helping them to make their money work for them.

“After more than two years of challenging lockdowns, not being able to see family and friends, and cancelled holidays, we’re now facing the ‘cost of living crisis.’ With the rise of energy and fuel prices, many households are feeling the pressure on their finances, leading to a change to their usual spending habits.

“So, It’s no wonder that consumer and retailer’s confidence has been affected, but what the last two years has shown us is that we are resilient. We’ve all learnt how quickly circumstances can change and how we need to adapt and make long-term affordability a key objective when thinking about the future of retail.” Richard Brassey, Head of Business Partnerships.


Encouraging your customers to spend smart

As a business, you want your customers to spend well. But that doesn’t necessarily mean spending more often. No – we’re talking about spending smart.


The future of ‘Buy Now, Pay Later’

The ability for consumers to ‘Buy Now, Pay Later’ (BNPL) has been a hot topic in the world of finance for a few years now – and has received criticism from some quarters. For some consumers, BNPL can be a convenient way of spreading the cost of their shopping, but there are concerns whether people are spending more than they can afford and adding to existing debts, which they might already be struggling to manage. Read more.

Get in touch

To discuss your business requirements and how Barclays can support you, contact us today.


*The consumer confidence survey was carried out between 24 and 28 June 2022 by Opinium Research on behalf of Barclaycard. There were 2,000 respondents, providing a representative sample of UK consumers by age, gender, region, and income group. The monthly spending data is based on Barclaycard credit card and Barclays debit card transactions related to the period 21 May 2022 to 24 June 2022

**All figures, unless otherwise stated, were carried out by YouGov Plc between 28 and 29 June 2022 on behalf of Barclays Partner Finance.  The sample size was 2125 adults providing a representative of all UK adults (aged 18+).

***Starting in June 2022, the monthly Consumer Spending Index has returned to a year-on-year comparison (i.e. comparing June 2022 against June 2021), with some additional month-on-month comparisons (i.e. comparing June 2022 against May 2022) where relevant.

Established in 2014, Barclaycard issues a monthly press release commenting on consumer spending trends.

Barclaycard sees nearly half of the nation’s credit and debit card transactions, which provides us with unique insight into UK consumer spending. The monthly spending data in this press release is based on Barclaycard credit card and Barclays debit card transactions, and is analysed by the Barclays Market and Customer Insights team. It relates to the period 21 May 2022 to 24 June 2022. It is compared with 22 May 2021 to 25 June 2021.