London Daily

Focus on the big picture.
Wednesday, Sep 03, 2025

Busy restaurants belie a tale of tightening belts in cost-of-living crisis

Busy restaurants belie a tale of tightening belts in cost-of-living crisis

Consumer spending, still partially buoyed by lockdown savings, is about to take a hit. But will it mean recession?

Business has been better than expected this year for Paul Askew’s fine-dining restaurant in central Liverpool. He feared for its future amid the worst cost-of-living crisis in a generation, but so far the punters have kept coming.

“January is usually the quietest month,” says the chef patron of the Art School restaurant, where menus start at £39 a head. “But people were feeling liberated and came out in large numbers. The start of the year was better than we could have hoped, and that has continued.”

Faced with the biggest hit to household incomes since modern records began in the 1950s, businesses across the UK are bracing for a slowdown in consumer spending, as the price of everything from gas and electricity to food and clothes soars.

But experts say a two-speed consumer economy could emerge, with richer households, who saved record sums during lockdown, continuing to spend. The signs are there: as well as the rush back to restaurants there was a scramble to airports this Easter, and the housing market is booming. And all this is despite the worst inflation since at least 1992 and amid reports of growing use of food banks and rising fuel poverty.


For Askew, bookings for May and June have slowed and he worries that tightened budgets could keep diners away. His costs are rising too: prices of beef and lamb are up more than a quarter, which could force him to increase menu prices.

“I think as people see direct debits, energy bills and the weekly shop going up they will start to cut back,” he says. “That’s a worry.”

His hope is that a lockdown savings glut and a desire to spend on experiences rather than physical goods after two years of life on hold will keep diners coming.

“We may be insulated by the furlough effect, which has given some people more money in their pocket. That may help for three to six months. But it’s how long it goes on for that’s the big question.”

So far the picture is mixed. Consumer confidence collapsed in April to its second-lowest level in almost 50 years, as energy prices and tax hikes added to the inflation squeeze. Retail sales fell by more than expected in March as skyrocketing food and fuel prices made shoppers tighten their belts. Some economists warn a summer recession may be on the cards.

Part of the retail slump is down to consumers switching to spending on services after the end of restrictions. Supermarkets profited in lockdown, but now face tough competition as pubs, restaurants and travel rebound.

Retail sales account for about a third of overall consumer spending. Credit and debit card figures from Barclaycard showed other forms of spending booming over the Easter weekend as Britons enjoyed days out in the sun. Restaurant sales rose by 116% compared with Easter 2021, and by more than a third on 2019. Pubs, bars and nightclubs saw a 74% jump on pre-Covid levels.

Some economists think savings are helping. According to the Bank of England, more than £200bn was salted away during lockdown, but this was concentrated in the top 40% wealthiest households, and in occupations where home working was possible. Poorer households lost money in the pandemic and are also expected to see the biggest hit to their incomes.

“The least affluent households will be disproportionately impacted because more of their income goes on food and energy,” said Richard Lim of consultancy Retail Economics. “It’s a very uneven picture.”


Figures from accountant Deloitte confirm this. They show that 5% of households with income of £10,000 or less were able to save in the first three months of this year, compared with 38% of households with overall income of £100,000.

While the economy could be helped by the spending of savings, analysts say it will still be under severe pressure and could come close to stalling as many people tighten their belts. Headwinds to come include higher interest rates and a further increase to the cap on gas and electricity bills this autumn.

“Consumer confidence is flashing a big red warning sign,” said Robert Wood at Bank of America. “You don’t normally get confidence this low without consumers cutting back. And if they are, we may be quite close to recession. There’s a huge hit to real incomes.”

Unlike some analysts, the US investment bank is not forecasting a recession because it expects business investment to rebound and some households to draw down their savings while others increase their borrowing. But consumers account for two-thirds of the UK economy, so the stakes are high.

“If the consumer stops growing the economy generally stops growing,” Wood added. “It’s the biggest worry for this year.”

Newsletter

Related Articles

0:00
0:00
Close
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Court of Appeal Allows Asylum Seekers to Remain at Essex Hotel Amid Local Tax Boycott Threats
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
Nvidia Reveals: Two Mystery Customers Account for About 40% of Revenue
Woody Allen: "I Would Be Happy to Direct Trump Again in a Film"
Pickles are the latest craze among Generation Z in the United States.
Deadline Day Delivers Record £125m Isak Move and Donnarumma to City
Nestlé Removes CEO Laurent Freixe Following Undisclosed Relationship with Subordinate
Giuliani Seriously Injured in Accident – Trump to Award Him the Presidential Medal of Freedom
EU is getting aggressive: Four AfD Candidates Die Unexpectedly Ahead of North Rhine-Westphalia Local Elections
Lula and Putin Hold Strategic BRICS Discussions Ahead of Trump–Putin Summit
WhatsApp is rolling out a feature that looks a lot like Telegram.
Investigations Reveal Rise in ‘Sex-for-Rent’ Listings Across Canada Exploiting Vulnerable Tenants
Chinese and Indian Leaders Pursue Amity Amid Global Shifts
European Union Plans for Ukraine Deployment
ECB Warns Against Inflation Complacency
Concerns Over North Cyprus Casino Development
Shipping Companies Look Beyond Chinese Finance
Rural Exodus Fueling European Wildfires
China Hosts Major Security Meeting
Chinese Police Successfully Recover Family's Savings from Livestream Purchases
Germany Marks a Decade Since Migrant Wave with Divisions, Success Stories, and Political Shifts
Liverpool Defeat Arsenal 1–0 with Szoboszlai Free-Kick to Stay Top of Premier League
Prince Harry and King Charles to Meet in First Reunion After 20 Months
Chinese Stock Market Rally Fueled by Domestic Investors
Israeli Airstrike in Yemen Kills Houthi Prime Minister
Ukrainian Nationalist Politician Andriy Parubiy Assassinated in Lviv
Corporate America Cuts Middle Management as Bosses Take On Triple the Workload
Parents Sue OpenAI After Teen’s Death, Alleging ChatGPT Encouraged Suicide
Amazon Faces Lawsuit Over 'Buy' Label on Digital Streaming Content
×