Spending on 'isolation economy' categories of groceries, alcohol, entertainment and hobbies is running at £247 million per week during lockdown, equivalent to an annual £12.9 billion increase.

However, average overall consumer spending has decreased by 31 per cent per person, equating to an annual fall of £215 billion, according to a new report from Legal & General and the Centre for Economics and Business Research (CEBR).

This change is largely a result of UK adults’ increased expenditure on these four key 'at home' categories during the Coronavirus lockdown. This shift, comes as consumers are spending an average of £17.9 billion less per month in the wider economy, as a direct result of COVID-19.

UK adults are now spending an average of £104 per week on the top four isolation economy categories alone – a five per cent increase on pre-crisis spending. Those aged 35 to 54 are the biggest contributors in terms of spend, averaging £170 million per week on these four key sectors.

Overall, however, despite this shift in where money is being spent, UK households are spending an average of 31 per cent less, equating to a fall in expenditure of £4.1 billion per week.

Recent government data has revealed that 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 showed that on average, 32 per cent of employees have seen a reduction in their working hours and a third have experienced wage cuts.

Many consumers are having to make cutbacks in certain areas, even if they haven’t seen a change in their employment status, but for those still in employment, spending on the combined four key categories of the isolation economy has risen. The employed are now spending an average of £107 a week on groceries, alcohol, entertainment and hobbies – a 10 per cent rise on pre-lockdown levels.

By contrast, spending on takeaways and fitness-related activities have declined most, with the share of people reporting a decrease in spending exceeding those reporting an increase by 27 percentage points and 14 percentage points, respectively. The share of people reporting a decrease in spending on tobacco, socialising and costs associated with education was seven per cent higher than those reporting an increase for each of those categories.

When the monetary value of spending on the four major categories if the isolation economy is averaged across the UK, groceries are the only category that has seen an increase in monetary terms. UK adults are now spending £73.69 per week on grocery shopping, compared to £67.51 prior to the outbreak of the pandemic. This increase in spending has largely been driven by those aged between 35 to 54, who are spending 15 per cent more each week to reach £89.94, versus an eight per cent increase in spending among the under 35s, taking their spending to £56.90.

The research also revealed that local economies and businesses could stand to benefit as a result of these changes in consumer behaviour, with 60 per cent of survey respondents saying that when the lockdown ends they plan to buy more products in local stores to help the local economy. A further 58 per cent of respondents said that they would be willing to pay more for products that have been made in Britain, rather than imported from abroad.

"The COVID-19 crisis is creating fundamental changes to how we work, live and how we spend both our money and our time," commented Legal & General chief executive Nigel Wilson.

"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, well-being and life sciences to replace falling spend and fewer jobs in traditional face-to-face consumer industries like travel, physical retail and hospitality."

Share Story: