Danni Hewson, AJ Bell head of financial analysis, comments on the latest retail sales figures and the news that Ofgem’s energy price cap will rise by 1.2% from January.
She said: “Retailers had already sounded the alarm, expressing concern that pre-Budget jitters were denting consumer confidence and that would-be shoppers were putting off spending decisions just in case their finances took an unexpected hit.
“Whilst the new government had promised in its manifesto that taxes on ‘workers’ wouldn’t increase, the speculation about changes to employer National Insurance (NI) contributions was already taking root.
“Many understood that increased taxes on their employers would ultimately impact their financial lives and warnings now being issued by business after business that the raised NI would result in lower wage increases and job losses seem to bear that out.
“Whilst the picture had been an improving one, especially over the summer, there remain concerns that rising inflation and a tightening labour market will push consumers to tighten their purse strings again.
“It could be that people were simply keeping their powder dry, saving their pennies for the late half-term or to indulge over Christmas. It could also be that unseasonably mild weather simply delayed the purchase of winter woollies which have been needed over the past week. But with retailers like JD Sports reigning back sales expectations for the year, the next crucial couple of months could prove incredibly tricky for the sector.”
ENERGY PRICE CAP
“Twenty-one pounds might not seem a lot in the grand scheme of things but the fact the rise in the price cap comes off the back of a chunky October increase and is imposed just as households need to use more power will be tough for some to take.
“This year there is no cost of living payment to cushion the impact and for millions of pensioners there’s also the troubling issue of scrapped winter fuel payments.
“People have made changes, they’ve lowered thermostats, added draught excluders and limited the number of rooms they heat. There are new tariffs which could offer ways to bring down bills, but for those struggling under the weight of energy debt today’s announcement will just pile on the worry.
“Whilst inflation has come down, prices haven’t, and with the prospect that energy costs are unlikely to return to pre-2022 levels finding a sustainable solution to the UK’s long-term energy situation must remain a priority.”