Experts say the outlook for consumer spending is unusually uncertain (Image: Getty)
Panicked retailers are pinning hopes on a Boxing Day spending bonanza to bolster shrinking bottom lines caused by Labour’s horror Budget.
Tomorrow’s shopping free-for-all offers a final chance for millions ofbattered businesses to salvage something from a ghastly six months.
The final throw of the dice will be to offer knockdown prices in a bid to tempt cautious shoppers out of their homes and splash the cash.
They hope bargain basement offers will encourage conviction after consumer confidence hit rock bottom at a time remain stubbornly high.
Economist Julian Jessop said: “The outlook for consumer spending is unusually uncertain, due in part to the fallout from the Budget.
“Incomes are still rising faster than prices for most households and there are plenty of bargains in the shops but confidence has fallen since the summer and consumers seem reluctant to make major purchases until the prospects for jobs and are clearer.”
December is the biggest month of the year for retailers. Last year the total spent was £53 billion, compared to the January to November average of £37 billion, according to the ONS Retail Sales Index.
December is the biggest month of the year for retailers with £53 billion splurged in 2023 (Image: Getty)
Footfall last December was up 31% [compared to November] but it has been down year-on-year in 14 of the past 15 months in a chilling foreboding of what could be a shop-shy Boxing Day marking a damp squib end to 2024.
The BRC-KPMG Retail Sales Monitor, which takes the pulse of consumer habits, suggests the remainder of the year and the start of next could be particularly grim for the bruised high street.
Consumer sentiment on the economy decreased sharply between July and September ahead of Labour’s first Budget in 14-years, and has remained low since then.
In the last snapshot 19% thought the economy would improve in the next three months, while 38% felt it would get worse.
The survey showed consumers believe the Budget will have more of an effect on the UK economy than their personal finances – 38% of those thought the impact on the economy will be negative. Among those who think the Budget will affect their personal finances, 33% felt it would have a negative impact, compared to 19% who thought it would be positive.
Overall, consumers are planning to reduce spending across most categories this year versus last year.
Kris Hamer, director of Insight at the British Retail Consortium, said: “The festive trading period is a vital time for retailers, with over a fifth of annual sales taking place in the final two months of the year. Retailers will hope that the momentum of Christmas will help boost Boxing Day and January sales. This is much needed after a challenging year which has been marked by low consumer confidence and weak sales growth.”
Incomes are rising faster than prices but confidence has fallen since the summer (Image: Getty)
Although wages have risen, unemployment has fallen. This, coupled with plunging confidence, suggests trouble ahead.
After two cuts in the summer many experts predicted the Bank of England would go further before the end of the year but “heightened uncertainty” has kept them at 4.75 per cent.
Meanwhile, the Confederation of British Industry, which speaks for almost 200,000 businesses, warned the economy is “headed for the worst of all worlds” with activity set to fall sharply in the first three months of 2025.
Companies that have been the lifeblood of a fully-firing economy expect to slash productivity and put the brakes on hiring. If this happens, Britain could soon slump into recession.
ONS figures showed the economy contracted by 0.1 per cent in October, a direct result of Budget nervousness, with Tory MP Mel Stride saying: “The warning lights for the British economy are flashing ever brighter.”
In a statement ahead of a make-or-break Bank Holiday for the high street the BRC said: “Generally, consumers have remained cautious this year, although our most recent Consumer Sentiment Monitor found that people’s perceptions of the economy and their own financial situation could be starting to improve.
“Over the year, smaller ticket items such as beauty products have performed the best, along with technology, as many have begun to upgrade phones and laptops purchased during the pandemic. While we would expect these trends to continue over the festive period, retailers will be hopeful consumers increase their Christmas spend.
“Retailers are already operating on very tight margins, so the increased costs announced in the Budget – employer National Insurance increases, the lowering of the National Insurance threshold, the increased National Living Wage, and costs associated with the new Employment Rights Bill – will be a real hit to the industry.
“They will be working hard to minimise the costs passed onto consumers, but these changes, along with costs associated with geopolitical tensions, climate change and crime, will make this increasingly challenging.”
Chief Executive Helen Dickinson added: “The weak spending intentions could pave the way for a challenging year for retailers who face being buffeted by low consumer demand and £7bn of new costs from the Budget set to hit the industry [in 2025].
“With sales growth unable to keep pace, retailers will have no choice but to raise prices or cut costs – closing stores and freezing recruitment. To mitigate the impact this will have on growth, the Government must ensure that its proposed business rates reform does not result in any shops paying higher rates than they already do.”