UK retailers braced for tough Christmas as shoppers feel squeeze | Retail industry

British retailers are bracing for a tough Christmas business period, as struggling consumers react to the worsening cost-of-living crisis by cutting back on spending.

As the most profitable period of the year for stores and online outlets approaches, two surveys published on Tuesday underlined the extent of the reduction in household budgets caused by the United Kingdom. double digit inflation rate.

Barclaycard’s monthly spending summary, which accounts for half of debit and credit card transactions, found that 50% of consumers planned to tighten their belts this Christmas, cutting back on gifts, food and drink, and socializing.

Esme Harwood, director of Barclaycard, said: “Rising petrol and supermarket costs continue to bite, but Britons are spending less on energy bills as government support kicks in and people find ways to economize at home. Consumers continue to trade big nights out for cozy soirees as they cut back on discretionary spending, while health and beauty and home improvement enjoy a bit of a boost.”

Two in three consumers (66%) were finding ways to save energy at home to lower the cost of their gas and electricity bills, Barclaycard found. Many of them wore more layers at home (63%), while 56% avoided using central heating unless absolutely necessary.

One in five (20%) had bought an electric blanket or hot water bottle, and almost a quarter (23%) bought or already used a deep fryer to help reduce the cost of cooking.

The first payments to consumers under the government’s energy bill support scheme were made in October, but Harwood said this was unlikely to change the mood.

“With the festive season just around the corner, we are likely to see further cuts as Brits master their Christmas spending. Consumers are taking a moderate approach to the holidays, seeking out loved gifts and setting spending limits to manage their costs during this traditionally expensive time of year,” he said.

Barclaycard said the amount charged to its cards was 3.5% higher in October than a year ago, but said spending was falling in real terms because prices had risen faster. The annual inflation rate rose to 10.1% in September.

Consumer confidence had been affected by political and economic uncertainty between the end of September and the end of October, the period covered by their report. Since then, the Bank of England has announced a increase in interest rates to 3%, while further economic pain is expected next week when Chancellor Jeremy Hunt is expected to use his fall statement on November 17 to raise taxes and cut spending.

The British Retail Consortium (BRC) urged the government to freeze trade fees so retailers could avoid passing on higher costs to customers. Its BRC-KPMG monthly sales monitor found that a small 1.6% rise in the value of goods sold in stores and online was actually a big drop in spending once inflation was factored in.

Paul Martin, KPMG UK retail director, said: “This increase is being driven by inflationary pressures and does not paint the true picture of falling sales volumes as consumers buy fewer products per store. .

“Sales in nearly every category, both online and in-store, fell year-over-year as consumers adjust to reduced household incomes.”

Helen Dickinson, chief executive of the BRC, said: “Christmas will come later than last year for many and can be bleaker than bright as families focus on making ends meet, particularly as payments rise. of the mortgage.”

With little sign of cost pressures abating, Dickinson said retailers were looking to the soccer World Cup and Black Friday to boost sales.

He added: “Retailers face a further £800m government-imposed inflationary increase on their commercial tariff bills next year, so the government should freeze tariffs and reform the broken transitional relief system. to relieve cost pressures that translate into higher prices at a time when people are less able to afford them.”

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