New Year hangover will follow festive splurge, says Deloitte

Retailers are set to benefit from an increase in Christmas spending by the region’s consumers, according to a new survey by accountancy firm Deloitte.

The firm, which carried out a Europe-wide survey of more than 20,000 consumers, found 76% of North West respondents said they intended to spend at least the same amount or more on Christmas gifts as last year despite worries about the economy and personal finances.

Similarly, 77% indicated they plan to do likewise on food and drink, and 76% said they would spend the same or more on entertainment and leisure.

The firm is predicting a harsh New Year hangover, though, with no growth in retail sales expected next year as disposable incomes shrink, with clothing and household goods retail being the categories that are most susceptible to cutbacks.

Some 42% of North West respondents expect the economy to deteriorate next year, and 37% fear their own financial position will worsen, compared with just 13% who think it will improve.

Sharon Fraser, head of Deloitte’s audit team in the UK regions, said: “These figures are encouraging and are consistent with what we’ve found in the past couple of years in the North West, including 2008 when we surveyed consumers after the collapse of Lehman Brothers. 

“However, the question is what will happen when the party is over? From January 4, VAT will increase to 20% and in April, National Insurance will increase for some.

“In addition, we’ll begin to see the spending review have an impact as higher unemployment in the public sector combines with cuts in child benefit, higher train fares and other measures to create a situation where reduced disposable income is inevitable.”

Deloitte predicts that the value of retail spending in the UK will increase by 1% this Christmas, taking national retail sales in December just beyond £37 billion.