Fun factor returns as UK spends more on eating and drinking out

Spending by households on hotels, bars and restaurants leapt by nine per cent year-on-year in February, the strongest annual increase seen in all the categories covered last month by the Visa Europe UK Expenditure Index.

For the first time in six months, consumers’ spending on recreation and culture also saw an annual increase, with growth of 1.1 per cent recorded in February.

Solid annual spending growth was also seen in the household goods category, which saw a 3.6 per cent increase - while spending on food, drink and tobacco also saw a 2.7 per cent year-on-year increase. Spending on transport and communication was up by 0.8 per cent year-on-year.

Looking at the different ways in which people are handing over their cash, Visa said that online spending saw annual growth for the first time since last September, with a 0.8 per cent year-on-year increase recorded in February.

Face-to-face spending on the high street was up by 1.5 per cent year-on-year, marking the second month in a row of annual growth by this method.

The easing pressure of inflation on households may be giving some consumers a confidence boost, the report said.

Figures released by the Office for National Statistics (ONS) last month showed that inflation fell to its lowest level on record in January amid low oil prices and fierce supermarket competition. Inflation is expected to slide further in coming months.

The Consumer Price Index (CPI) measure of inflation fell from 0.5 per cent in December to 0.3 per cent in January, its lowest level since records began in 1989.

The growth in people’s spending on “fun” activities reported by Visa also comes after the Institute for Fiscal Studies (IFS) found last week that average household incomes are back to where they were before the financial downturn struck.

Despite the improvement, the IFS said that the recovery in living standards has been much slower than after previous recessions and some groups, such as young people, have come off worse than others. The IFS found evidence to suggest that some people think their income prospects have taken a permanent hit.

The Visa report also found that some categories saw falling year-on-year spending in February. These were clothing and footwear, health and education as well as a miscellaneous goods and services category - which includes spending on hairdressing and jewellery. The miscellaneous category saw the largest year-on-year fall in spending, recording a 4.6 per cent decline.

Kevin Jenkins of Visa Europe said: “With household incomes returning to pre-recession levels and low prices on food and fuel, consumer confidence looks in decent shape. British consumers look to be spending more on the things they enjoy.”

He said that hotels, restaurants and bars saw a “bumper month” in February, “while spend on recreation and culture bounced back for the first time since August 2014”.