Christmas retail spend to rise 1% this year

The increase will take the value of retail sales in December to just over £37bn as consumers continue to spend despite the difficult economic climate.

The report, which surveyed 2,000 people in the UK, found that 71% of UK consumers plan to spend the same amount or more than last year on gifts; 76% expect to spend the same or more on food and drink, and 79% plan to match or increase last year’s spend on entertainment and leisure.

Ian Geddes, UK head of retail at Deloitte, said that the figures were in line with consumer behaviour over the past two years. “Each year, consumers tell us they will do whatever they can to enjoy Christmas and this year will be no different.”

But the report also warned that this year’s strong performance is unlikely to be repeated in 2011. Deloitte forecasts that the industry will not see any growth over the year, with a “real risk” that sales values will actually fall.

Richard Hyman, strategy retail adviser to Deloitte, said: “The industry will take the value of forecasts for 2010 and whilst retail sales for the while year will be broadly flat, in the context of the wider economic environment this is a tremendous outcome.”

He added that record low interest rates, which have lowered the cost of mortgage repayments, had helped to give consumers more disposable income.

But Geddes questioned whether retail had “shaken off the downturn, or merely postponed the pain”, pointing to the rise in VAT on January 4 combined with the impact of the Spending Review, cuts in child benefit and increase in train fares as areas for concern next year.

Consumers are pessimistic about the outlook of the both the economy and their personal finances in 2011, with 38% expecting the economy to deteriorate. They are preparing to cut their own spending on household goods and clothes, as well as eating out and entertainment. While food is most likely to be protected, 39% of consumers surveyed were prepared to make cutbacks.