Positive Shift in Consumer Spending

As we move further into 2025, concerns regarding consumer spending in the UK appear to be diminishing. After a period of frugality in late 2024, evidenced by a savings rate hovering around 12%, just shy of the 2010 financial crisis peak, the outlook is shifting.

Recent data from the Office for National Statistics (ONS) indicates a decline in savings rates during January and February, alongside a rise in consumer credit uptake. Analysts at Pantheon Macroeconomics highlight that this trend suggests a willingness among consumers to spend rather than save, a positive development for retailers looking to bolster their sales figures.

Retail Performance: Next’s Growth Trajectory

One notable example of this spending resurgence is reflected in Next plc (NXT), a leading UK retailer. The company revised its first-half sales growth forecast from an initial expectation of 3.5% to an impressive 6.5%. This upward revision underscores a robust performance, particularly within its domestic market where 82% of its full-price sales originate.

Next’s international operations are also flourishing due to a significant increase in marketing expenditure, which rose by 85% in the previous year. The retailer plans to enhance its digital marketing budget for international operations by an additional 25% in the current year. CEO Lord Wolfson has emphasized a disciplined approach, stating that only marketing campaigns with a minimum 50% return on investment will proceed.

However, the company cautions that increased labor costs may slow growth in the latter half of the year. As a result, executive Jane Shields recently sold £5.5 million worth of shares, which may signal a response to potential market pressures.

Changes at Social Housing REIT

While the retail sector shows signs of recovery, the social housing investment landscape is undergoing significant changes. Social Housing REIT (SOHO) is adapting under a new investment adviser, Atrato, following a tumultuous period spurred by issues, including a scandal involving Home REIT.

Focused on investing in social housing properties, SOHO aims to support individuals with mental or physical care needs. Recently, two key tenants have posed challenges—My Space Housing Solutions and Parasol Homes, prompting the Charity Commission to investigate My Space over possible fund mismanagement.

Atrato has taken proactive steps to enhance operational efficiency, including resolving ongoing tenant issues and reconfiguring leased properties. Chris Phillips, chair of Social Housing REIT, mentioned these initiatives would likely improve rent collection and occupancy rates.

Demonstrating confidence in these efforts, Atrato’s co-founders have made substantial purchases of SOHO shares, reflecting their commitment to the company’s future direction. These moves indicate a strategic investment approach, reinforcing atrato’s reputation as a seasoned manager in the REIT sector.

Conclusion

The evolving dynamics of consumer spending and the strategic shifts within the social housing REIT sector illustrate significant trends as we advance through 2025. While retailers like Next adapt to changing consumer behaviors, Social Housing REIT navigates a complex landscape to ensure stability and growth. Monitoring these developments will be crucial for stakeholders across both industries.