Welcome to the first article in our series on the Cost Of Living Christmas 2023. Over the next few weeks we will be looking at what is predicted for Christmas 2023 and the challenges that consumers and businesses, especially retail and hospitality, are facing.
Christmas is not just important for the public but also represents the most important period in the retail and hospitality calendar, with festive gift buying and celebrations making up a significant part of their annual revenues.
After an especially tough year for UK businesses, with the retail and hospitality sector being amongst the worst affected, strong spending this Christmas is vital for the continued survival of many companies.
Unfortunately, 2023 has seen the most significant cost of living crisis in recent memory. With most UK households being significantly worse off than before the pandemic, or even last year. Amidst stretch household budgets, a generally poor short term economic outlook and high levels of consumer anxiety for their financial future the Christmas is predicted to see reduced spending by the public.
What was 2023 like for consumers
This year is not one that many UK households will look back on fondly. The cost of living, which has been rising since COVID, has started to truly test the majority of UK households this year. With many going from having reduced disposable income to struggling just to get by. Along with this reduced spending power is a bleak outlook for the next few years and rock bottom consumer confidence.
The significant challenges seen in 2023 are:
- Cost of energy – Whilst the public saw more energy relief than businesses the beginning of 2023 saw record high energy bills. Whilst prices fell in the warmer part of the year, they are ow predicted to rise in early 2024.
- Inflation – Inflation soared in 2022 and whilst it fell throughout the year the owner occupiers housing cost, the costs associated with owning, maintaining and living in one's own home, rose.
- Interest rates – Interest rates have risen through the year and are now at a 15 year high. This has put a significant strain on the finances of many.
- Price rises outside of inflation – Whilst inflation has inherently caused price rises, the costs of goods adjusted for inflation has also been rising. COVID has caused significant shortages and delays for products and, at the same time, there has been an increase in demand for many items. Manufacturers and vendors have also seen significant increases in costs over the last few years. These factors, amongst others, have contributed to significant price rises.
Consumer spending outlook
Given the challenging year faced by the UK public it is no surprise that spending is expected to be significantly reduced compared to previous years. Research by the British Retail Consortium shows that consumers are buying lower value goods, even if they are spending more than last year. Overall UK households are set to be £3 billion worse off than last year.
TopCashback, the UK’s leading cashback site, has carried out extensive research of consumers heading into the festive period and found:
- 26% of people plan on reducing their spend this Christmas
- 53% of people are worried about the cost of Christmas this year
- 26% of people are avoiding hosting to save on costs
- 18% of people are not visiting family to save on travel costs
- 15% of people are not putting up lights the Christmas to save on energy costs
Financial services giant KPMG’s research has also found that:
- 33% of people plan to eat and drink out less this Christmas
- 33% of people plan to spend less on Christmas groceries
- The demographic most likely to report on cost cutting is 35-44
Barclays UK Chief Economist, Jack Meaning, says that data shows UK households were ‘pulling back from discretionary spending and are increasingly worried about their future ability to spend’
Should these statistics prove true then the retail and hospitality sectors may not enjoy the increases in revenue that they are hoping for and may mean that 2024 will be a lean year for consumer spending. This could well mean that the predicted rise in insolvencies in 2024 will see a significant number of businesses in these sectors. If you are worried about rising insolvency rates resulting in bad debt then Red Flag Alert can help! Click here for a free trial and protect your business today.
Join us for our next article, where we will look at the retail and hospitality sector coming into Chrismas.