UK families are planning to spend less this year as the mounting cost of living pressure hits the Golden Quarter for retailers, a recent report has stated.
According to a recent survey of 1,000 consumers conducted on behalf of RSM UK, families plan to spend on average £602 – a 13 per cent decrease when compared to £694 last year.
Overall, the average spend this Christmas remains flat as cost-conscious consumers plan to spend on average £467 when compared to £463 last year. However, when you factor in inflation at 4.6 per cent, consumers will have less to spend this year, so “real” budgets will sit at £446.
Over a quarter (26 per cent) of consumers will use some form of credit to fund their Christmas spending. Whilst this shows households aren’t being put off by high interest rates, it also suggests some are having to resort to borrowing as their finances continue to be stretched. Over a third (37 per cent) of consumers plan to use regular income to pay for Christmas and almost a quarter (23 per cent) will use their savings.
Jacqui Baker, head of retail at RSM UK, comments, “Families are having to make hard decisions this year as the cost of living continues to bite. Savvy shoppers will be on the hunt for a bargain, so retailers will have to work hard to encourage consumers to spend; potentially extending discounting through December to shift stock before the end of the Golden Quarter.”
The biggest cutbacks in Christmas spending will be on homeware (46 per cent will spend less), clothing (42 per cent) and socialising (41 per cent). But the top areas that consumers plan to spend more are on Christmas dinner (25 per cent will spend more), food and drink at home (24 per cent) and presents (23 per cent).
Robyn Duffy, senior analyst at RSM UK, added, “Families stand as one of the most vulnerable groups amidst the current economic landscape. Almost all respondents (91 per cent) who are parents were concerned that high-interest rates over the next 12 months would significantly impact discretionary spending. Additionally, 93 per cent expressed apprehension about the escalating cost of goods affecting non-essential expenditure.
“While the Consumer Price Index is on a downward trend, it merely signifies a deceleration in the pace of rising costs. Overall, expenses continue to escalate year on year, placing a considerable strain on families. Although interest rates may have reached their peak, giving a semblance of stability, the prevailing outlook suggests they will persist at elevated levels for some time yet. These factors are particularly burdensome for families who are grappling with additional mouths to feed, childcare expenses, and essential clothing needs, with a larger portion of their income dedicated to essential spending.”