High street banking giant Barclays has issued a stark warning to its debit card holders, following the release of a major new report that reveals a significant drop in confidence regarding household finances.
Household Confidence Takes a Hit
The comprehensive Barclays report, which combines data from hundreds of millions of customer transactions with detailed consumer research, shows that confidence in household finances fell sharply from 70 per cent in January 2025 to just 64 per cent by November. Over the same period, confidence in the broader UK economy remained low, averaging a mere 24 per cent throughout the year.
This decline in sentiment has translated into a noticeable shift in spending patterns. While overall expenditure grew by 1.6 per cent in 2024 and 4.1 per cent the year before, essential spending declined by 2.3 per cent in 2025. This marks a stark reversal from the 0.9 per cent growth seen in essential spending during 2024.
The Rise of 'Purposeful Spending'
In contrast, non-essential spending saw a marginal increase of 0.8 per cent. However, this growth still lagged behind the latest CPIH inflation rate, which stood at 3.8 per cent. The data suggests consumers are becoming far more selective with their disposable income.
Karen Johnson, Head of Retail at Barclays, commented on the findings released on Monday, January 5. "While confidence in the UK economy has declined, UK households’ confidence in their ability to manage their money has remained strong," she stated. Ms Johnson noted this has led to a resilient performance in categories like travel, entertainment, and beauty, as people focus on what they value most.
"It is encouraging to see that through purposeful spending, consumers continue to prioritise the things that bring them joy, unlocking the potential for UK economic growth," Ms Johnson added.
Winners and Losers in Consumer Spending
The report highlights clear winners in the current economic climate. The pharmacy, health and beauty sector was 2025's strongest performing category, surging by 9.5 per cent. Analysts attribute this boom to the so-called 'lipstick effect' and a continued focus on personal wellness.
Similarly, the entertainment category grew by 4.3 per cent, indicating that consumers are still willing to pay for memorable experiences and moments of joy, even while making cutbacks in other areas.
Barclays, which processes nearly 40 per cent of the nation's credit and debit card transactions through its issuing and acquiring businesses, is uniquely positioned to track these spending trends. The bank, which rivals HSBC UK, Santander, Lloyds, NatWest, and Nationwide, maintains a significant presence with branches across cities including Birmingham.
