In anticipation of the holiday season, UK households are adopting a more frugal approach to Christmas spending, as revealed by a recent study from audit, tax, and consulting firm RSM. The survey highlights a 13% decrease in expected Christmas expenditure, with families planning to allocate £602 compared to the previous year’s £694—an adjustment that may be further impacted by inflation.
Surprisingly, 26% of consumers are turning to credit options to finance their Christmas shopping, despite the backdrop of rising interest rates. While providing immediate financial flexibility for seasonal spending, this trend raises concerns about potential budgetary repercussions in the early months of 2024.
Credit instruments such as credit cards, loans, overdrafts, and Buy Now, Pay Later (BNPL) services are gaining traction among consumers. However, a substantial portion (37%) still intends to rely on regular income, with an additional 23% planning to tap into their savings.
The study identifies specific areas where families are economizing their Christmas budget, including homewares (46% spending less), clothing (42%), and socializing (41%). Conversely, consumers are prioritizing spending on Christmas dinner (25% spending more), food and drink for home celebrations (24%), and gifts (23%).
In light of these adjustments, Jacqui Baker, Head of Retail at RSM UK, emphasizes the need for strategic discounting throughout December to attract price-conscious consumers seeking bargains.
Senior Analyst Robyn Duffy underscores the vulnerability of families in the current economic landscape. «Concerns about high-interest rates impacting discretionary spending are prevalent among parents, with 91% expressing worry. Additionally, 93% are apprehensive about the rising cost of goods affecting non-essential expenditures. While interest rates may have peaked, economic stability remains uncertain, urging families to navigate their finances cautiously.»
This prudent holiday spending trend reflects a broader financial consciousness among UK families as they tread carefully through the festive season amidst economic challenges.
