UK Shoppers Cut Back Spending In Warning Sign For Reeves

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(Bloomberg) -- British shoppers reined in their spending in February, according to two surveys that could point to lingering weakness in the economy ahead of a crucial update from Chancellor of the Exchequer Rachel Reeves.

Retail sales rose just 1.1% compared with a year earlier, the British Retail Consortium said Tuesday, down sharply from the previous two months and much lower than inflation which has reached 3%. Separate figures from Barclays also showed spending up by just 1% in February.

The numbers will make uncomfortable reading for Reeves as she prepares to deliver an economic statement on March 26. She is likely to cut government spending plans in order to keep the public finances under control, amid a poor outlook for growth and higher government borrowing costs.

Retail sales had started 2025 strongly, according to official figures for January that showed people indulging in more food to eat at home. However, volumes fell across all other categories, suggesting Britons remain cautious in the face of higher economic uncertainty, and Tuesday's numbers point to a possible slowdown in February.

While the UK narrowly avoided a technical recession at the end of last year, prospects for growth remain unclear. GDP is expected to have grown 0.1% in January, according to economists surveyed by Bloomberg; the Office for National Statistics publishes the latest figures this Friday.

"Consumers remain cautious with their spending and many are continuing to prioritise saving, travel and experiences," said Linda Ellett from KPMG, which works on the BRC survey. "Nervousness about the economy is deferring other big ticket purchasing."

Labour wants to grow the economy by paving the way for more housebuilding and infrastructure projects, while fixing public services. Yet any immediate relief is likely to prove elusive without help from the UK consumer, as household spending makes up two thirds of output.

Britons have been saving more of their real pay gains and holding back on big ticket purchases. Families' finances remain squeezed by rising food and energy bills, and higher housing costs. Many are also bracing for job losses, inflationary pressures and weaker wage growth when Reeves' payroll tax hikes come into force in April.

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