UK consumers will still splash out at Christmas, says Mintel

December 1, 2009

Christmas 2009 will be good for the high street even though it is the second one consumers will face in a recession, according to new research from Mintel.

Shoppers will splash out at Christmas

The research company is forecasting 2% retail sales growth in December compared with last year, driven by the recovery in consumer confidence, continuing low interest rates and a mini boom in sales before VAT goes back up on 1 January 2010.

Mintel’s research shows that even though consumers will continue to be a little more cautious this Christmas, the number planning to spend ‘a lot less’ on gifts has fallen 3% year-on-year.

In addition, 20% of consumers claim that although money is tighter, they will still splash out for Christmas – a figure unchanged from 2008 and therefore unaffected by the economic crisis this year.

Richard Perks, director of retail at Mintel, said: “Consumer confidence has been steadily improving in recent months and the proportion of people feeling relaxed about their financial situation has been increasing, even though they know there are problems ahead.

“There’s no doubt that consumer demand has held up far better than anyone expected a year ago and that is entirely down to the cuts in interest rates. Knowing that there are tough times to come, consumers will decide to have a 'good Christmas' while they can still afford it.”

However, it is not all good news for retail as the VAT change on 1 January 2010 is set to impact consumer spending behaviour. While Mintel forecasts a rush of buying in the week after Christmas to beat the VAT hike and retailers capitalising on this by bringing sales forward, prospects for 2010 and 2011 are poor with incomes being squeezed by higher interest rates and taxes.

Furthermore, despite spending set to increase, it seems the economic climate has made its mark on consumer attitudes to spending. One in three consumers (34%) say they have a budget for spending which they stick to – up 2% from 2008.