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Changing ways Brits spend their money over the decade

19 February 2013

  • Latest data reveals £58bn spent on entertainment, 60% more than in 2001 as we nearly double our spending in restaurants and cafes

2001 doesn’t seem very long ago, but what we buy and the way we pay for it has changed enormously over the last decade.  In its latest report, The Way We Pay, the Payments Council brings together all the big trends over that period for the first time.  It shows how many cash payments are continuing to migrate to debit card, how the debit card has won the day for now, but also how it’s possible to see the end of the road for plastic as the mobile phone could take over our payments arsenal.

What we buy:
Despite the seemingly endless economic gloom of the last few years, we are having a lot more fun than a decade ago.  Entertainment spending has risen by over 60%, outstripping the growth in consumer spending by over a quarter. We have doubled our spending in restaurants and cafés (+102%), and increased our spending on cinema and shows by 63%. Pubs and bars have lost out in real terms, though. We are spending just 7% more on going out for a drink.  In total, we spent £58bn having fun last year, almost one and a half times as much as we forked out for gas and electricity (£34bn).
Supermarkets have grabbed share from up and down the high street. We spend 58p in every retail pound in them today, up from 46p ten years ago.  As supermarkets have expanded their range of goods and discounted heavily, spending in furniture and homeware shops is down by nearly half, newsagents have lost nearly a fifth of their trade, and spending in DIY stores is down by nearly half. The amount spent on petrol in supermarkets has almost tripled.  This is a significant change over the decade, because in 2001, only 7% of payments at supermarkets were for petrol as opposed to 12% in 2011. Clothing shops have bucked the retail trend and increased their share of our shopping spend, by more than two thirds, but they still only account for 3% of our retail purchases.         

The cost of housing has shot up, whether you own or rent. The amount we collectively spend on rent has risen 104% since 2001, whilst spending on mortgages has increased by 99%. Big shifts have taken place in many of our regular payments.  The appendix shows the surprising magnitude of the changes in just ten years as, for example, we fell in love with the internet and pay TV, and jilted TV rentals, trade unions and catalogue shopping.

Flashing less cash – how we pay for it
Paying for our goods and services has changed dramatically too.  Cheque usage continues to fall, halving every five years, hand-in-hand with our reliance on cash – particularly for our regular payments and higher value spontaneous payments.

For example in 2001, an astonishing 40% of home rental payments were made in cash and 43% of our retail spending by value used notes and coins too.  By 2011, landlords collected only just over a quarter of rents in cash, while only 30% of shopping was paid for in this way (with the majority of payments being under £5).  The rise of the debit card has been responsible for the decline of cash on the high street - indeed debit card spending has risen almost fourfold since 2001- while Direct Debits have completely changed the way we make our regular payments. 

We still make a lot of very small cash transactions (three out of five of our one-off payments) but since 91% are under £25, contactless payment technology which has started to become a more familiar sight at shop tills and on our cards could revolutionise how way we pay.  Currently, most contactless payments are made using a debit or credit card upgraded with the new technology, but soon mobile phones could do the job instead.  By 2021, consumer spending is forecast to be roughly 45% higher, but the use of cash is expected to have fallen 1%, and cards may be in decline by then too. As we adopt new payment technologies, this may even prove a conservative forecast.

Adrian Kamellard, Chief Executive of the Payments Council said: 
We scarcely notice the steady changes in the way we pay, yet someone in their thirties today will see more change in their lifetime than in the entire history of money.  Even recent innovations such as payment via a mobile phone, which ten years ago some felt to be science fiction, will soon be commonplace.  The 2000s were the decade of the debit card.  The 2010s are likely to be the decade of the mobile phone.  Just as we can’t imagine how we ever did without the internet, many people will soon wonder how we used to be so dependent on cash and cheque.  Twenty years from now even cards may seem archaic.

The quiet revolution in payments has enabled the creation of whole new industries such as e-shopping, it has changed our behaviour, and it has reduced transaction costs, and increased the speed and efficiency with which we can all pay each other.  The next ten years will see even faster change. It’s easy to imagine a future where we merely pat our pockets for our keys and phone.  The wallet could become a historical curiosity.” 

Access the full report here.