British shoppers could spend less on Christmas for the first time since 2012, as a fall in real wages and continuing economic uncertainty put a brake on celebrations.
A slump in spending on Christmas getaways, as well as cutbacks on clothing and household goods, are expected to result in a 0.1% dip in UK spending during the key shopping period of November and December, according to research compiled by IHS Markit for Visa, the card provider.
High streets will take the pain, with spending at physical stores expected to drop 2.1%, the third successive year of contraction and the biggest since 2012. In contrast, online sales are forecast to rise by 3.6% over the period, accounting for a record share of this year’s Christmas spending. Of every £5 spent during November and December, almost £2 will be spent online.
Mark Antipof, the chief commercial officer at Visa, said: “Looking back, consumers were in a sweet spot in 2016 – low inflation and rising wages meant there was a little extra in household budgets to spend on the festive period. This year has seen a reversal of fortunes – with inflation outpacing wage growth and the recent interest rate rise leaving shoppers with less money in their pockets.
“Although overall sales are likely to disappoint, we expect some clear winners to emerge. Online and mobile are set to take a record share of Christmas spending. Hotels, restaurants and bars are also forecast to report strong growth as Britons choose to celebrate Christmas and New Year closer to home.”
The prediction of a gloomy Christmas comes after retail sales tumbled to their first year-on-year fall since 2013 last month, according to the Office for National Statistics.
Food prices, which were 3.5% higher than a year earlier, helped push the volume of goods bought in shops and online down by 0.3% from October 2016.
A recent survey by the CBI business lobby group showed high street sales falling at their fastest rate since the height of the recession in 2009. Meanwhile, a report by the KPMG/Ipsos Retail Think Tank late last month also warned of tougher times for retailers in the final three months of the year. It said some non-food sales had been pulled forward into September, when a cold snap kicked off the autumn season early, while rising personal debt levels, the edge up in interest rates, shrinking wages and increasing inflation all added to pressure on household budgets.
John Lewis, Marks & Spencer, Next and New Look have all reported gloomy figures in recent weeks, not helped by an unseasonably warm October.
It’s a nailbiting end to the season in which many chains bank the lion’s share of their annual profits, and retail bosses are battling to protect profit margins against the rise in imported goods resulting from the weakness of sterling.
But not every analyst is predicting a slowdown. A consumer survey by Deloitte suggested that shoppers plan to spend an average of £544 each this Christmas, 1.8% more than last year, and are expected to spend £10.1bn in the week of Black Friday, nearly 4% more than last year as more retailers take part in the US-inspired promotional day.