Festive spending not in a happy place

The report found that the expected average of £393 per person festive spend is £33 less than last year or £1.8 billion less overall than in 2021 and the average spending of every demographic group is expected to decline even to below pre-pandemic levels for those over the age of 45.

For those spending less this year, 57 per cent said it is because their personal finances have been hit and 54 per cent said they have less money to spend.

PwC’s annual Festive Predictions report painted a challenging picture for retailers and hospitality operators in the critical run-up to Christmas.

Retailers had been hoping for a continuation of the strong momentum from Black Friday, which saw increased shopper interest, particularly among under 35-year-olds and an estimated £0.5 billion in additional spending. However, consumers are instead planning to reduce their festive spending, with an average spend of £393 per adult, that’s 8 per cent less than last year’s £426 and 4 per cent less than the £412 spent before the pandemic in 2019.

Shoppers of all age groups said they will spend less, with the biggest decline among 45–54-year-olds, who expect to spend 10 per cent less than in 2021 and 20 per cent less than before the pandemic. Overall, 22 per cent of shoppers plan to spend less in 2022 and only 9 per cent think they’ll spend more.

Among those spending less this year, the top reasons cited were because their personal finances have been hit (57 per cent), because they have less money to spend (54 per cent), and because they are less confident about their finances (47 per cent).

Kien Tan, retail director at PwC, said after two years of challenging trading due to pandemic lockdowns, tier restrictions, and the omicron variant curtailing festivities, the high street had been hoping for a bounce back this Christmas.

“But, with the cost-of-living crisis beginning to bite consumers, and overall spending forecast to decline by 8 per cent this year as a result, retailers will instead need to help their customers economise, while keeping Christmas special,” he said.

“At the same time, they will also be trying to attract the one in 10 consumers who actually intend to spend more in 2022.”

Christmas dinner — and food and drink more generally — remain the key spending priorities, with almost as many people saying they will spend more as spend less. But, with record food price inflation, this still suggests that many Christmas dinner tables will see less lavish feasts than in previous years.

This also reflected the fact that fewer of us (66 per cent) expect to be spending Christmas attending — or hosting — an extended family gathering than in a typical year before the pandemic (71 per cent). In fact, with 2022 being the first Christmas without widespread travel restrictions in three years, 11 per cent of Britons hope to be on holiday or visiting family abroad this year, almost twice as many as in a normal year (6 per cent).

Across all other spending categories, the survey found that between a quarter and a third expected to spend less, with higher priority placed on gifts for children and pets than on other categories. There have been notable declines in priority on fashion and Christmas stocking fillers and treats, suggesting that ‘practical gifting’ will take precedence over frivolous spending in more frugal times.

Lisa Hooker, PwC’s consumer markets leader, said with earnings barely keeping up with record inflation on utilities and groceries, it’s no surprise that consumers are telling us they plan to spend less this Christmas.

“The fact that spending intentions are negative across every category means that no corner of the high street will be spared,” she said.

“However, with 2022 being the first completely restriction-free Christmas since before the pandemic, can retailers convince shoppers to part with more of their cash when they get to the till, particularly as inflation means they will be getting less for their money? And, if so, could that lead to a credit card hangover as bills need to be paid in the New Year?”