Retailers braced for first Christmas sales fall for five years

 
Helen Cahill
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Londoners Shop On Christmas Eve For Last Minute Presents
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Christmas spending is expected to fall for the first time in five years as consumers contend with rising inflation and an interest rate rise.

Spending over the Christmas period is expected to drop by 0.1 per cent in real terms, according to data published today by IHS Markit and Visa. During the same period last year, spending rose by 2.8 per cent.

Read more: DEBATE: Do falling retail sales foreshadow economic doom?

High street stores will come under significant pressure, with spending expected to fall by 2.1 per cent for this segment of the retail industry.

By contrast, online spending is forecast to grow by 3.6 per cent.

Clive Black, retail analyst at Shore Capital, said that flat spending growth suggested retailers faced "a tougher festive period but not necessarily a tough one."

"'Flat' is, of course, a bit mellow, but it is also not a disaster," he said.

"Additionally, for those predicting depression and worse some 18-months ago at the time of the EU Referendum it should be remembered that 'flat' is following on from a strong Christmas in 2016, and unfortunately this is all too often forgotten."

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Richard Lim, chief executive of research consultancy Retail Economics, warned that the "pincer effect" of rising costs and lower consumer spending could put the future of some firms at risk. Retailers could respond by passing on costs, closing unprofitable stores, and reducing capital expenditure, he said.

The British Retail Consortium (BRC) has urged the government to freeze business rates in the Autumn Budget to help retailers weather a squeeze in consumer spending.

“We know that retailers are already grappling with profound changes in shopping habits, squeezed consumers and relentless rises in costs," a BRC spokesperson said.

"At the same time households are having to contend with rising inflation, moderate wage growth and with higher statutory minimum pension contributions in the pipeline.