British businesses fear a gloomy Christmas ahead. Almost half of households plan to cut festive spending due to the soaring cost of living, and sales are already falling sharply in inflation-adjusted terms.
Payments processor Barclaycard said 48 per cent of people it surveyed over Oct. 21-24 plan to spend less this Christmas, with 59 per cent intending to buy less generous gifts and 42 percent cutting back on socialising.
The British Retail Consortium said spending at major stores in October was 1.6 per cent higher than a year earlier, slowing from 2.2 per cent in September and representing a big fall in the volume of purchases once inflation was taken into account.
“Christmas will come later than last year for many and there may be more gloom than glitter as families focus on making ends meet, particularly as mortgage payments rise,” BRC Chief Executive Helen Dickinson said.
British consumer price inflation returned to a 40-year high of 10.1 per cent in September, and the Bank of England last week forecasted it would peak at around 11 per cent during the current quarter.
The BoE also raised interest rates to three per cent, their highest since 2008, and said Britain was at risk of two years of recession—longer than any in the past century, although the outright decline it forecasts is shallower than in 2008-09.
The BRC’s measure of like-for-like sales, which adjusts for changes in retailers’ floor space, slowed to 1.2 per cent in October from September’s 1.8 per cent.
“The small rise in sales masked a much larger drop in volumes once inflation is accounted for,” the BRC said.
Britain’s official retail sales data, which cover more shops than the BRC figures and is adjusted for inflation, showed sales volumes excluding fuel dropped 6.2 per cent year-on-year in September.
Spending on food in the three months to October rose by 5.1 per cent compared with a year earlier, while non-food spending dropped by 1.2 per cent, the BRC said.
Mild weather saw shoppers delay buying winter clothes, but electric blankets and air fryers saw high demand as people sought cheaper ways to cook and stay warm.
Barclaycard said consumer spending in October was 3.5 per cent higher than a year before, up from 1.8 per cent growth in September but still representing a fall when adjusted for inflation.
“Consumers continue to swap big nights out for cosy evenings in as they reduce their discretionary spending,” Barclaycard director Esme Harwood said.
Spending on hospitality and leisure grew at the weakest pace since March 2021, when COVID-19 lockdowns were still in effect. This was due to rail strikes and people saving money by getting takeaway meals and digital subscriptions to consume at home.
Spending on energy bills was 36 per cent higher than a year earlier, down from a 48 per cent rise in September, as many households received a £400 government credit to their bills.
