UK businesses fear gloomy Christmas as cost of living soars
9:21 pm Monday, November 07th, 2022
By David Milliken
LONDON (Reuters) – British businesses fear a gloomy Christmas ahead, as 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% of people it surveyed over Oct. 21-24 plan to spend less this Christmas, with 59% intending to buy less generous gifts and 42% cutting back on socialising.
The British Retail Consortium said spending at major stores in October was 1.6% higher than a year earlier, slowing from 2.2% 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% in September and the Bank of England last week forecast it would peak at around 11% during the current quarter.
The BoE also raised interest rates to 3%, 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% in October from September’s 1.8%.
“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% year-on-year in September.
Spending on food in the three months to October rose by 5.1% compared with a year earlier, while non-food spending dropped by 1.2%, 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% higher than a year before, up from 1.8% 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, due to rail strikes as well as people saving money by getting take-away meals and digital subscriptions to consume at home.
Spending on energy bills were 36% higher than a year earlier, down from a 48% rise in September, as many households received a 400 pound government credit to their bills.
(Reporting by David Milliken, editing by Andy Bruce)
