Christmas retail spend expected to drop by £2bn due to cost of living crisis

The latest analysis by RIFT Tax Refunds has shown that the cost of living crisis is expected to dampen the Christmas spirit of the nation’s consumers to the tune of £2bn, as retail sales are forecast to fall by -2.3% versus 2021. 

The research shows that an estimated £82.2bn is forecast to be spent this Christmas, down not only on the five year peak seen in 2021, but also the pre-pandemic spend seen in 2019. 

In 2019, prior to the outbreak of COVID-19, Christmas sales across the UK hit £83.1bn, a huge 8.1% increase on the previous year. Little did we know that the following Christmas was going to look very different and having been plunged into pandemic restrictions just weeks before the big day, the total value of our Christmas spend fell by -4.1% to £79.7bn in 2020. 

However, while some restrictions remained in place, a greater sense of festive normality returned in 2021 and consumer sentiment soared, with total retail sales hitting £84.2bn, a 5.6% year on year increase and the highest Christmas spend in five years. 

But just as we thought things were back on track following the pandemic, the nation has been hit hard by the worst cost of living crisis in decades. As a result, it’s expected that total retail sales will dip by -2.3% in 2022, with the economy seeing a reduced spend of £2bn. 

While London and the South East are expected to see the highest total retail spends this Christmas period at £14.8bn and £12.8bn respectively, they are also two of the top three regions expected to suffer from the greatest decline in consumer sentiment. 

In fact, the research by RIFT Tax Refunds shows that total Christmas spend is expected to fall by -4.4% in the South East and -4.3% in London when compared to 2021, with only the North West seeing a greater decline at -5.2%. 

In the North East, retail sales are expected to dip by -3.6%, with the East Midlands (-2.3%) and East of England (-2.2%) also expected to see a reduction of more than two per cent in total Christmas spend. 

CEO of RIFT Tax Refunds, Bradley Post, commented: 

“The average household spent just over £3,000 within the retail sector last Christmas and this increased spend brought a very welcome boost to a sector that had suffered greatly during the pandemic. 

Unfortunately, this return to health looks to be short lived, with the cost of living crisis expected to dampen consumer sentiment considerably this year. 

The only silver lining is that, while we expect to see the nation tighten their belts this Christmas, the total contribution to the economy via the retail sector will sit above the pandemic low seen in 2020.”