PPI payouts 'boost Christmas spend'

ShoppingCompensation pay-outs following widespread insurance mis-selling scandals will help boost high street spending in the run-up to Christmas to £88.4 billion, analysts say.

The forecast of a 2.2% rise in retail spending during the last three months of the year is attributed to improving consumer confidence as well as one-off factors such as pay-outs over payment protection insurance (PPI).

Banks have been forced to set aside billions to compensate customers who may have been sold PPI products they did not need, and according to Verdict analysts it is one of the factors that will help consumers feel more confident about spending.

Another is the Royal Mail share flotation - which has already seen nearly 700,000 ordinary retail investors see the value of their stakes rise by hundreds of pounds.
The rise predicted by Verdict represents an extra £1.95 billion for retailers to fight over in the run-up to Christmas.

"Consumer confidence drives spending and shoppers have far more reasons to be cheerful this year," the analysts said.

"The economic news is more positive; the housing market is moving with further initiatives being introduced to encourage buying.

"Job creation is outpacing cuts; and though PPI refunds and the Post Office float do not affect everyone they have a further halo effect of boosting the view that at last things are getting better."

Verdict research director Maureen Hinton said that in addition, a recession baby boom meant there was growing Christmas spending on children.

The report said food would be the main focus for Christmas spending this year but non-food sectors would recover, including an upturn in furniture, DIY and gardening after years of decline.

Food continued to be mainly driven by inflation, though volumes would be up too.

Discounting is expected to be widespread in non-food sectors, which will also see increasing volumes and total sales lifting by £600 million.

Verdict predicted the total spend would include £52 billion on non-food items and £36.4 billion on food and grocery.

Online sales are forecast to rise 12% to £11.6 billion.