Consumers spent less than expected over Christmas and are unlikely to loosen the purse strings in the new year. Photograph: Christopher Furlong/Getty Images
A clutch of retailers are expected to ring in the new year by going bust, following weak pre-Christmas trading and the shortest ever festive sales dash, the shopkeepers’ trade body has warned.
This year has already been the worst for the retail industry since the height of the financial crisis in 2008, with the collapse of 52 chains responsible for 3,936 stores and 48,080 staff.
The British Retail Consortium said it expected a number of well-known chains to collapse after failing to make enough money over Christmas. “At this time of year there will be some retailers for whom the sums don’t add up, and it will be a challenge,” said Mandy Murphy of the BRC.
She said it was impossible to predict how many chains would go bust, but warned that the first figures for December trading are likely to make difficult reading for retailers.
High street bellwether Next will kick off the sector’s closely watched Christmas trading updates on Thursday. The BRC’s figures for December trading will follow on Monday.
Professor Joshua Bamfield, director of the Centre for Retail Research thinktank (CRR), said consumers have cut back on Christmas presents and spent less in the sales.
He said the average British household spent £80 less than expected in December. Bamfield said shoppers spent about £70bn in shops and online over the six weeks to the end of December – £2bn short of what the CRR predicted in November.
The CRR said sales during the weekend before Christmas were thought to be particularly weak with an estimated spend of just £2.85bn, significantly below forecasts of £4bn. It blamed cautious shoppers and the wet weather.
Bamfield warned that trading in the sales had also been much worse than retailers have made out. “We don’t think post-Christmas sales have ever tailed off this quickly,” he said. “This year, we have had sales starting on Christmas Eve and tailing off days after Christmas.”
He said there were far more parking spaces available than normal, indicating fewer people had headed to the shops. “Sales are falling away and, from what retailers have told us, footfall is expected to be down 50% between 27 and 31 December. New Year’s Eve may be quite dead,” he said. “The retail industry has been saying ‘it’s great, it’s fantastic’ – but it will be a different story when they add up the figures in January.”
Research has suggested retailers that survive the immediate purge of struggling chains will then face months when consumers are tightening their purse strings. A consumer survey found 59% of respondents planned to cut retail spending over the next six months, with only 2.6% saying they planned to spend more.
Neil Saunders, managing director of research house Conlumino, said: “Retailers should be under no illusions that the consumer remains under significant pressure and most households intend to cut spending as they go into the new year.”
He said confidence could fall further when consumers receive credit card bills in January. “Christmas is usually a time when households put their financial worries on hold, to a degree. January is when consumers really start to take stock and that’s when we expect the realities of a Christmas on credit to start to impact confidence. It has to be said that the outlook for the start of the year does not look too rosy.”