UK lockdown drives shift in consumer spending habits

The UK lockdown has driven a shift in consumer spending habits equivalent to an annual £12.9bn, according to a new report published by Legal & General, and economics consultancy, Cebr.

The report has suggested the change is largely a result of UK adults increasing their expenditure on four key “at home” categories since the Government imposed lockdown – groceries, alcohol, entertainment and hobbies.

The financial services group added that this shift, however, has come as consumers are spending an average £17.9bn less per month in the wider economy as a direct result of coronavirus.
Following the announcement of the UK lockdown on 23 March, adults are now spending an average £104 per week on these four categories alone – a 5% increase on pre-crisis spending. Legal & General highlighted that this equates to a weekly rise in spending of £247m, and that those aged between 35 and 54 are the biggest contributors in terms of spend, averaging £170m per week on the four sectors.
Despite the £12.9bn shift, the report also noted that UK households are spending an average of 31% less – equating to a fall in expenditure of £4.1bn per week, or £215bn per year.
Legal & General CEO, Nigel Wilson, commented: “The Covid-19 crisis is creating fundamental changes to how we work, live and how we spend both our money and our time. Businesses should prepare for lasting change to the consumer economy and falling levels of demand that other areas of the economy will need to step up to fill.

“Billions will need to be invested in new growth industries like health, wellbeing and life sciences to replace falling spend and fewer jobs in traditional face-to-face consumer industries like travel, physical retail and hospitality.”
Legal & General’s report also highlighted recent government data that shows 6.3 million jobs have been furloughed since the launch of the Coronavirus Job Retention Scheme on 20 April.

Separate research by Cebr and Opinium has shown that on average, 32% of employees have seen a reduction in their working hours, while a similar proportion (33%) have experienced wage cuts.
The report, which is describing the UK’s economy in lockdown as the “Isolation Economy”, indicated that for those still in employment, spending on the combined four key categories of the Isolation Economy has risen – and suggested the employed are now spending an average £107 a week on groceries, alcohol, entertainment and hobbies, a 10% rise on pre-lockdown levels.

Wilson continued: “The Isolation Economy is a new feature of our daily lives and now encompasses some £13bn a year of the consumer economy. As the hub of the Isolation Economy, the home is becoming a more flexible space, doubling-up as a place for  schooling, work, fitness and entertaining – and we can expect changes to the way we think about and design homes for future homeowners.

“Covid-19 is a huge challenge and a wake-up call for everyone. Health and wellbeing will become more important components of inclusive capitalism, and some elements of the new Isolation Economy with different consumer spending patterns are likely to endure even as social distancing is eased.”

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