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The Guardian - UK
The Guardian - UK
Business
Sarah Butler

British shoppers likely to spend £4.4bn less on non-essentials during Christmas period

About 38% of shoppers identified themselves as ‘distressed’ and at a high risk from the soaring cost of living.
About 38% of shoppers identified themselves as ‘distressed’ and at a high risk from the soaring cost of living. Photograph: Hollie Adams/Getty Images

British shoppers are expected to spend £4.4bn less on non-essentials – a fall of 22% – in the run-up to Christmas as a surge in the cost of living puts a squeeze on their spare cash.

Almost 60% of shoppers expect to cut back on non-food spending in the so-called “golden quarter”, or last three months of the year when most retailers book the majority of profits, according to research by Retail Economics with retail technology firm Metapack.

The outlook piles further pressure on businesses which are already facing higher energy bills and labour costs as well as an increase in the cost of goods forcing many to cut back on trading hours.

Richard Lim, the chief executive of Retail Economics, said: “Inflation is set to peak at exactly the wrong time for retailers. Shoppers’ budgets are already under intense pressure with inflation reaching decade-highs across international markets. Consumers are concerned, budgets are under pressure, and households are intending to cut back this year as they struggle to make ends meet.

“Against this weakening consumer backdrop, retailers are also facing a pincer movement of rising input and operating costs which is testing business models to breaking point. With profit margins under intense pressure, some retailers are planning to pass on costs through delivery and returns options, precisely the areas that encourage consumers to seek out alternatives.”

Clothing and footwear retailers, who have enjoyed a boom over the summer thanks to the return of socialising and big events such as weddings, look to be the hardest hit with just over a quarter of consumers looking to cut back in that area.

High street bellwether Next has already trimmed sales and profits expectations for Christmas in view of an expected downturn as it warned of tough times continuing into next year.

About a fifth of shoppers are expecting to cut back on electrical goods, toys and homewares, all of which enjoyed strong sales during the pandemic lockdowns, as 38% of shoppers identified themselves as “distressed” and at a high risk from the soaring cost of living and a similar proportion said they were “secure but concerned”.

While the switch to online shopping is expected to slow, as higher costs associated with delivering and taking back returned items force an increase in charges, high streets and other shopping destinations across the country will also feel the pinch.

Nearly a fifth fewer shoppers are expected to be out and about in December this year than pre-pandemic, with numbers only projected to be 4.2% up on last year when the threat of Omicron kept many at home. October and November are expected to be even worse than last year with numbers down 2.1% and 2.7%, according to Springboard.

Diane Wehrle, insights director at Springboard, said she was expecting a more severe drop in visitor numbers to retail destinations because of “consumers’ fears over the impact of the rise in energy costs expected in October on their household budgets”.

Supermarkets have already seen shoppers reining in their weekly spend, ditching the little extras and switching to cheaper own-label items or to the discounters such as Aldi or Lidl.

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