Christmas spending 'set to fall for the first time since 2012'


Christmas spending is set to fall for the first time since 2012 as Brexit uncertainty and a drop in real wages weigh on UK households, research suggests.

The news could spell trouble for retailers, many of which rely on a spike in sales in the final months of the calendar year to help boost revenues.

Research compiled by IHS for Visa forecasts that consumer spending during the festive period is set to fall 0.1% in real terms compared with the same period last year, when spending grew 2.8%.

It would be the first time that spending has dropped over the November-December shopping period since 2012, when it declined 1.3%.

Oxford Street Christmas Lights 2017
Oxford Street Christmas Lights 2017

"The expected subdued performance in the final weeks of 2017 is in principal a product of the current economic environment currently characterising the UK," the report explained.

"Economic output has been undermined by Brexit uncertainty, whilst the past depreciation of sterling continues to feed through to rising consumer prices, leading to a further squeeze on household disposable income."

The report also laid the blame on a drop in real wages.

Figures from the Office for National Statistics (ONS) last week showed that the Consumer Prices Index (CPI) measure of inflation held at five-year highs in October at 3%.

Visa said higher prices have contributed to a "period of belt-tightening amongst consumers in recent months".

The high street alone is expected to suffer a 2.1% drop in spending, making it the third straight year that shopping at bricks-and-mortar stores has fallen over the period.

The amount that Britons spend on Christmas getaways is set to fall, resulting in a 4.5% drop in transport and communication for the season, while household goods sales are set to drop 1%.

Retail sales
Retail sales

Clothing and footwear is forecast to suffer a 0.5% drop in real terms spending.

However, online spending is set to increase by 3.6% - with £2 out of every £5 spent over the holidays to be spent online - helping it account for a record share of this year's Christmas spending.

Mark Antipof, chief commercial officer at Visa, said: "While it still looks likely that consumers will be hitting stores and websites in search of bargains this Black Friday and Cyber Monday, we expect spending for the duration of the festive season to be lower in comparison to last year.

"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."

He added that "2017 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".

Some sectors are still expected to enjoy a rise in spending, including hotels and restaurants up 3.4%, though Visa suggests that this could be the result of the Brexit-hit pound, with families opting to spend Christmas closer to home rather than abroad, where spending power has been reduced.

Food and drink sales, meanwhile, are set to come in flat, ending three years of consecutive growth, while spending on recreation and culture is set to grow 0.9% - far below last year's rise of 7.9%.