London: Britain’s young people are tightening their belts far more than older generations in a cost-of-living crisis that’s left Baby Boomers tapping their savings to keep spending.
A generational divide has emerged as Millennials and Generation Z reduce their spending to a crawl and cut back on goods and discretionary items, according to credit and debit card data from Barclays.
Older generations have built up a bigger cushion of savings to help maintain their living standards. Many were able to squirrel away more during the pandemic when shops, hospitality and entertainment venues were closed.
Overall spending is holding up even though prices across the economy are rising rapidly. Inflation hit a 41-year high of 11.1 per cent in October, more than five times the Bank of England’s 2 per cent target. But younger households with smaller financial cushions are cutting back the most.
Divergence between generations
At the start of 2023, spending on discretionary goods was flat or negative for 18 to 29-year-olds compared with a year earlier. It was about a fifth higher for over 64s, and for those aged 55 to 64 it was up 15 per cent.
Spending on goods fell slightly year-on-year for young adults in the first half of January, but it’s rising more than 12 per cent for over 64s and almost 9 per cent for the 55-64 age group.
While services spending is the strongest category for Gen Z with an increase of as much as 11 per cent increase, it rose by more than a third for those aged from 55 to 64.
Chris Stevens, director of investment sciences at Barclays, said the divergence between generations has become more pronounced recently and that it could partially be a catch-up effect following Covid-19.
“During the pandemic, older people reduced their spending by the most, and since the pandemic they have increased it the most,” Stevens said. “It could be a consequence of retirees accumulating a large chunk of savings during the pandemic, and now spending it.”
Stevens added that many older consumers who are less internet savvy are able to spend freely once again now that stores are open.
Card data suggest that spending has been resilient in the UK despite households being squeezed by double-digit inflation, higher taxes and a jump in mortgage rates. Barclays said consumption in January was fueled by higher spending on retail, entertainment and travel.
