Shops face ‘painful hangover’ in new year as 4 in 10 Brits will spend less this Christmas

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Stores are also reeling from a surge in their own bills and the impact of the rail and postal strikes. The Office for National Statistics said today retail sales by volume fell by 0.4 per cent between October and November, and by 5.9 per cent year-on-year.

Sales by value rose by 0.5 per cent over the month, and 4.2 per cent on last November but both were driven by price rises.

Last month’s Black Friday discounting event – normally an annual sales boost for retailers – was described by one analyst as a “damp squib”.

Jacqui Baker, from consulting firm RSM UK, said: “It’s likely to be a disappointing end to the year for the retail sector and a painful hangover for some retailers.”

Darren Morgan, director of economic statistics at the ONS, said: “Retail sales fell overall in November, driven by a notable drop for online retailers, with Black Friday offers failing to provide their usual lift.”

There were signs that people started their food shopping early. Sales in stores rose by 0.9 per cent last month, the ONS said.

With the high street under pressure, people are being urged to buy their Christmas gifts in stores rather than online.

The Federation of Small Businesses is among those encouraging shoppers to make the effort to buy their presents in person, especially given planned postal strikes threaten to hit online deliveries before Christmas.

Tasnime Rotherham, founder of Peterborough-based independent tea retailer Very Craftea, said: “My sales for 2022 compared to 2021 are down by 50 per cent.

“Though sales increased in November, it was only because I managed to sell a lot of inventory at cost, so no profit.

“December has already been slower than usual and this is due to the perfect storm of postal strikes as people are concerned items won’t arrive on time, the cost-of-living crisis, rising interest rates and also higher delivery charges and packaging cost increases.

“To top it all off, the cost of tea has increased by 40 per cent.

“It’s an exceptionally tough market for a small retailer right now.”

James Daunt, boss of the Waterstones bookshop chain, said most retailers are still “probably expecting 2023 to be a time to baton down and concentrate on the basics because it is going to be tough”.

He told BBC’s Today programme: “In our case, books do very well and continue to be resilient but we also rely on our neighbours being full of people and the general health of retail footfall.

“When everything is going down, everyone suffers a bit.”

Shoppers are forecast to spend £2.87billion this weekend – the last before Christmas. A report from website VoucherCodes estimates that 34.3 million people will shop today and tomorrow, with 21 million set to do so in-store.

Last month’s 0.4 per cent fall in sales – the eighth decrease in a row – compares with a 0.3 per cent rise predicted by economists.

Black Friday and the start of the football World Cup were expected to give retailers a boost.

Helen Dickinson, chief executive of trade body the British Retail Consortium, said: “Black Friday provided a small boost to retailers but there are signs that many consumers are holding off Christmas spending until the last moment.

“Many retailers will be holding their breath as they look to the hugely important December sales period.”

Gabriella Dickens, senior UK economist at consultants Pantheon Macroeconomics, said: “The drop in retail sales in November suggests that consumers are buckling under the pressure of surging inflation, despite government support for their energy bills.”

Figures out this week showed the consumer prices index measure of inflation dipped to 10.7 per cent but still close to a 40-year high.

Food and soft drink prices leapt more than 16 per cent.

A survey by accountancy giant EY found more than four in 10 consumers expect to spend less over the festive season, with 29 per cent planning savings on food, while nearly a third will spend less on alcohol.

Present-giving will also be hit, with 34 per cent planning to cut back on gifts for the family.

EY’s Silvia Rindone said: “Looking ahead, it’s questionable if retail sales will hold firm in December given the soaring cost of living and the impact of rail and postal strikes.”