The past nine months have seen huge swings in households’ spending, both in total and across various goods and services. In this briefing note, we analyse the geographical patterns of these changes. We compare the extent of the recovery from the first national lockdown in different parts of Great Britain, as well as the effects of the second English lockdown and the numerous other localised public health restrictions we have seen. We examine the implications of these changes for geographic inequalities. In addition, we provide the first analysis of the causal impact of public health restrictions in the UK on spending: we measure the effect of shutting hospitality and non-essential retail venues on spending on categories of goods and services, showing how consumers substitute to different items when these restrictions are imposed.

Our analysis uses anonymised user data from the Money Dashboard (MDB) budgeting app. These track transactions of app users in real time, allowing us to build a detailed picture of their spending patterns from before the crisis to the end of November. We combine this with a novel database of public health restrictions by local authority over time. We also use Google mobility data to track trends in footfall to different venues.

Key findings

  1. The biggest declines in spending when the crisis struck in the spring were seen in the South of England – and the South has had the weakest recovery since, with spending in November still 7% below pre-crisis (compared with 3% across the country as a whole). Scotland and Wales, by contrast, have recovered to roughly their pre-crisis levels.

  2. The big declines seen for the South are driven by London. Londoners’ spending fell by around 40% in April and in November was still over 10% below its pre-crisis level. This is in part due to large falls in restaurant & recreation spending by Londoners. The picture is even starker when we compare footfall in London (rather than by Londoners) with other areas, thereby capturing the impacts of reductions in tourism and commuting. Even before the second English lockdown, inner London footfall in retail & recreation venues was more than 40% below pre-crisis – compared with 10–20% in outer London and the rest of the South. Over the same period, footfall at public transit stations had also fallen by more than half in inner London, versus 40% in outer London and 30% in the rest of the South. These patterns will put a strain on London businesses as well as councils and Transport for London.

  3. Higher-paid areas and less-deprived areas have seen a larger fall in spending than others, with reduced spending in sectors most affected (such as restaurants) having the largest impacts on spending patterns of better-off individuals. These trends have gone some way to reducing geographic inequality in spending: in January the highest-paid third of areas had spending 26% above the lowest-paid third, while in November that gap had dropped to 14%. But since high-income households have saved more, these trends could reverse as the economy opens up and those savings are spent.

  4. The first lockdown had an enormous impact, with total spending falling by about a third in April. By contrast, the second English lockdown has had much more modest effects: spending rose in England by 2% between October and November. While that was much weaker than the 10% rise seen in Scotland over the same period, it clearly suggests a much smaller effect than the first lockdown. Part of the reason for that is that the restrictions were less severe, but businesses and consumers also seem to have adapted: restaurant and clothing spending did both fall, but by far less than seen in April. This may reflect more restaurants providing takeaway services (or consumers using them more) and consumers more readily switching online for clothes purchases.

  5. When we examine the effects of specific public health restrictions, we find that shutting hospitality venues has quite small effects on total spending. While restaurant & recreation spending unsurprisingly does fall significantly, the decrease seems to be offset by increased spending on online retailers. But closing non-essential retail on top of that does cause a sizeable (5%) drop in total spending. It causes falls in clothing spending, transport spending and cash withdrawals, only partially offset by increased spending on groceries and (especially) online retailers. Since these retailers tend to only have a limited presence in the local area, the degree to which this substitution mitigates the effects of public health restrictions for local economies and high streets is likely to be modest.