Consumer spending in the U.K. fell for the first time in nearly four years during May according to data from payments technology provider Visa Inc., adding to the economic uncertainty facing Britain in the wake of a general election that saw the ruling Conservative Party lose its outright majority.
Expenditure dropped by 0.8% in May compared with the same period a year earlier, the June 12 report said, following an increase of 0.3% in April. It is the first reduction in spending since September 2013.
Face-to-face spending fell by 5.3%, the sharpest drop since April 2012 — figures that are likely to signal bad news for retailers such as Tesco Plc and J Sainsbury Plc that have large brick-and-mortar store portfolios. Spending on clothing and footwear dropped 5.2%, while food and drink expenditure declined 0.6%. The best performing sector was e-commerce, which increased by 6.9% after a fall of 0.3% in April.
"Our index clearly shows that with rising prices and stalling wage growth, more of us are starting to feel the squeeze," said Kevin Jenkins, Visa's U.K. and Ireland managing director.
Annabel Fiddes, an economist at IHS Markit, said the short-term prospects of a rebound looked relatively bleak. "The squeeze on household finances is likely to get worse as the Bank of England forecasts faster increases in consumer prices in the coming months," she said. "Combined with relatively low levels of consumer confidence, uncertainty around the outcome of Brexit and a slowdown in U.K. economic growth, it's likely we will continue to see weaker expenditure trends at least in the near-term."
The Visa report was not the only downbeat economic release to come in the immediate aftermath of the U.K.'s June 8 general election, which saw an inconclusive result and uncertainty over the future of Theresa May, the prime minister. The Institute of Directors, a business lobby group, said June 12 that 65% of its members believed uncertainty over the make-up of the new government was "a significant concern" for the U.K. economy.