Shoppers are set to cut festive spending by more than £4bn this Christmas, research published on Tuesday showed, as the cost of living crisis squeezes budgets.
According to a report from consultancy Retail Economics in association with Metapack, 70% of British shoppers are planning on cutting back on non-food spending “to some extent” in the last three months of the year.
Overall, British consumers are likely to spend £4.4bn less on non-essentials, down 22% on the same period a year previously.
The last three months of the year are crucial for most retailers, as consumers splash out on food, presents and homewares.
But the weakening economic outlook and growing cost of living crisis, including rising inflation and interest rates, means people are increasingly unlikely to spend as freely this year. Inflation is at a near-40 year high of 9.9%, while interest rates have risen seven times since last December, to 2.25%, with further hikes widely expected.
Almost 30% of consumers cited inflation as the biggest concern across all markets.
Retailers, meanwhile, are battling record energy bills, higher input prices and labour shortages.
Richard Lim, chief executive of Retail Economics, said: “Inflation is set to peak at exactly the wrong time for retailers.
“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.”
The 22% predicted fall in spending in the UK is larger than declines expected elsewhere. The report found that spending was likely to be down by 14% in Spain, 12% in Italy and France, 9% in Germany, and by 14% in the US.
The survey also found that 38% of shoppers identified as being at high risk from the soaring cost of living, while a similar amount were “secure but concerned”. Around a fifth said they expected to cut back on electrical goods, toys and homewares this quarter.
Lim noted: “Consumers will be more focused on low prices than ever during this peak period. Successful retailers will be those who double-down on their value proposition.”
Retail Economics based its research on a number of consumer surveys carried out in August in the UK, US, Canada, Australia, Germany, France, Italy and Spain. In total, more than 8,000 consumers responded.