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%.
“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%.
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.