Consumer Spending in the UK: Signs of Recovery

As we move into 2025, initial concerns regarding consumer spending in the UK are beginning to diminish. Following a phase of frugality in the last quarter of 2024, where the savings rate reached 12%, just shy of the financial crisis peak of 12.5% in 2010, there are signs that consumers are ready to loosen their wallets.

Data from January and February indicate a decline in savings rates alongside an uptick in consumer credit, suggesting that shoppers are increasingly willing to make purchases again. Analysts from Pantheon Macroeconomics noted, “Consumers decided to spend instead of building up deposits again; a good sign for retailers.”

This shift has been particularly notable in the retail sector, as evidenced by Next’s (NXT) recent updated guidance, which anticipates a 6.5% growth in first-half full-price sales—an increase of 3 percentage points from earlier projections.

Despite Next’s ongoing success, where 82% of its full-price sales stem from the UK market, the retailer is witnessing the most rapid growth internationally. The company plans to increase its digital marketing expenditure for its international operations by an additional 25% this year after already boosting it by 85% last year. Chief Executive Lord Wolfson confirmed that each campaign will be evaluated for profitability, with only those yielding at least a 50% return continuing.

Next is considered a strong performer within the UK retail market, currently valued at 16 times the FactSet consensus earnings, which positions it above its competitors. Nevertheless, predictions indicate a slowdown in full-price sales growth to 3.5% in the second half of the year, largely due to rising labor costs that could dampen consumer confidence. Consequently, Marketing and HR Director Jane Shields has taken the step of liquidating part of her holdings, selling 50,000 shares valued at approximately £5.5 million.

Developments at Social Housing Reit

Changes are afoot at Social Housing Reit (SOHO), with the new investment adviser, Atrato, stepping in after the previous manager, Triple Point Investment Management. The transition comes in the wake of challenges faced by the sector, particularly since the controversies surrounding Home Reit in 2022. SOHO specializes in investing in social housing properties tailored for individuals requiring mental and physical support.

The Reit has encountered tenant-related difficulties, notably with two entities, My Space Housing Solution and Parasol Homes. Following an investigation launched by the Charity Commission into My Space in 2022 due to potential conflicts of interest and mismanagement of funds, Atrato has focused on resolving these issues and transferring properties previously leased to Parasol.

Chris Phillips, Chair of Social Housing Reit, expressed optimism in the latest results, stating, “This proactive step will help improve rent collection and resident occupancy.” The leadership at Atrato is demonstrating a strong commitment to the Reit’s growth, with significant investments from co-founders Ben Green and Steve Windsor in March. Green purchased £311,000 and £494,000 worth of shares on April 3 and March 28, respectively, while Windsor made various acquisitions totaling over £500,000 in late March.

Atrato has a proven track record, having successfully managed Supermarket Income Reit (SUPR) until its recent transition in March. Shareholders in that Reit recently approved a measure to internalize its investment management efforts.