Household spending fell by 0.2% in 2025

Household spending in the UK decreased by 0.2% in 2025, marking the first decline since 2020, according to Barclays. Families are cutting back on essentials, including groceries.

The figures fell after growing 1.6 per cent in 2024 and 4.1 per cent in 2023. In a year marked by careful and considered budgeting, confidence in household finances consistently exceeded confidence in the economy. Some non-essential categories, such as beauty, travel and entertainment, bucked the general trends, as shoppers once again prioritised affordable treats and experiences that bring them joy.

The data reveals that essential spending declined -2.3 per cent in 2025, down from 0.9 per cent growth in 2024. Non-essential spending increased marginally, up 0.8 per cent, however this lagged behind the latest CPIH inflation rate of 3.8 per cent.

Confidence in the UK economy remained low in 2025, with a monthly average of one in four adults (24 per cent) feeling confident in the nation’s economic strength. In October, all seven measures of consumer and economic confidence tracked by Barclays declined for the first time since August 2022, when the Bank of England announced its biggest base rate increase in 27 years.

However, supported by prudent budgeting, at year-end, the majority remain confident in their household finances (64 per cent) and their ability to spend on non-essentials (52 per cent), although both measures have declined since January (from 70 per cent and 56 per cent respectively).

Linked to this confidence in discretionary spending, consumers found room in their budgets for experiences and “feel-good” purchases in 2025. Growth in non-essential spending consistently outpaced essential spending throughout the year, even when consumer and economic confidence were subdued. Almost half (44 per cent) of consumers say they like to treat themselves regularly, but find ways to do it on a budget, which led to categories such as pharmacy, health and beauty (9.5 per cent) and food and drink specialists (2.7 per cent) receiving a boost.

2025’s strongest performing category, pharmacy, health and beauty, saw double-digit growth in several months of 2025, marking close to five years (56 months) of consistent growth. Those spending on the pharmacy, health and beauty category splashed out £324 each on average, up from £291 in 2024, as the “lipstick effect” – when consumers buy small, affordable luxuries as a pick-me-up – persisted, while 71 per cent of consumers say they’ve invested in wellness in the last 12 months.

Earlier in 2025, Barclays chronicled the rise of male beauty spending, revealing that almost one in five (19 per cent) men now care more about beauty than they did 10 years ago, contributing to the category’s success. Further, a quarter of men (25 per cent) have now incorporated skincare into their daily routine, and one in eight (12 per cent) have spent money on a cosmetic procedure.

Over a third (35 per cent) of consumers, and 70 per cent of Gen Z, have used AI tools in the last year for budgeting, planning, and shopping. Of the 65 per cent who are yet to make use of AI, half (50 per cent) prefer to manage things without the help of tech, 42 per cent don’t trust AI and 30 per cent have privacy and data concerns.

The growth of AI is also transforming how people approach sales; 37 per cent of shoppers said they would use AI and other smart tools during their Christmas shopping, rising to 53 per cent for those aged 18-34. This group is turning to AI to research products (43 per cent), compare prices and deals (34 per cent), generate gift ideas (31 per cent) and set up personalised alerts (25 per cent).

Karen Johnson, Head of Retail at Barclays, said “While confidence in the UK economy has declined, UK households’ confidence in their ability to manage their money has remained strong, translating into the resilient performance of categories such as travel, entertainment and beauty. 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.”