UK shoppers turn to credit cards to fund summer spending – UK Finance

FILE PHOTO: A shopper carries a basket in a supermarket in London, Britain April 11, 2017. REUTERS/Neil Hall/File Photo

LONDON (Reuters) – British consumers spent more on their credit cards in August as they borrowed to fund a summer shopping spree but companies are more nervous in the run-up to Brexit, lending industry data showed on Wednesday.

Credit card lending by the main high street banks rose by an annual 5.8 percent, the strongest growth rate since February, UK Finance, a group representing banks and lenders, said.

“Growth in card spending remained fairly strong, reflecting the boost to retail sales from the warm weather as well as the growing use of credit cards as a preferred means of payment,” Peter Tyler, a director at UK Finance, said.

“However, the overall economic outlook remains mixed as household incomes continue to be squeezed by rising inflation.”

British households remain under pressure from inflation that has been rising faster than their pay for much of the past decade. But they have shown little sign of slowing their spending as Brexit approaches.

Official data published last week showed retail sales grew by more than all forecasts in a Reuters poll in August after an even stronger July.

Spending by households has taken some of the sting out of a general slowing in Britain’s economy since the 2016 Brexit vote.

UK Finance said overall consumer credit growth picked up a bit of speed to grow by 3.9 percent in August after a slowdown in July to 3.7 percent, its weakest rise since December 2014.

Companies were more wary than consumers as Britain neared its departure from the European Union with little clarity on its future trading ties with the bloc.

Net lending to businesses grew for a third month in a row but overall business borrowing remained subdued as uncertainty about the economy hit long-term investment decisions, UK Finance said in a statement.

“There has also been a further slowdown in the growth of business deposits, suggesting firms are experiencing tighter margins as a result of rising input costs,” Stephen Pegge, managing director for commercial finance at UK Finance, said.

Banks approved 39,402 mortgages last month on a seasonally adjusted basis, slightly fewer than in July and down 4.2 percent compared with August 2017.