Families cut back this Christmas as cost of living bites

• Families expected to spend 13% less this Christmas at £602, when compared to £694 in 2022 
• Overall, average Christmas spend down when you factor in inflation 
• Over a quarter of consumers will fund Christmas on credit this year, despite high interest rates

UK families plan to spend less this year as the mounting cost of living pressure hits the Golden Quarter for retailers. A survey of 1,000 consumers conducted on behalf of RSM UK showed that families plan to spend on average £602 – a 13% decrease when compared to £694 last year. 

Overall, the average spend this Christmas remains flat as cost-conscious consumers plan to spend on average £467 when compared to £463 last year. However, when you factor in inflation at 4.6%, consumers will have less to spend this year, so ‘real’ budgets’ will sit at £446.   

Over a quarter (26%) of consumers will use some form of credit* to fund their Christmas spending. Whilst this shows households aren’t being put off by high interest rates, it also suggests some are having to resort to borrowing as their finances continue to be stretched. Over a third (37%) of consumers plan to use regular income to pay for Christmas and almost a quarter (23%) will use their savings.

Jacqui Baker, head of retail at RSM UK, comments: ‘Families are having to make hard decisions this year as the cost of living continues to bite. Savvy shoppers will be on the hunt for a bargain, so retailers will have to work hard to encourage consumers to spend; potentially extending discounting through December to shift stock before the end of the Golden Quarter.’

The biggest cutbacks in Christmas spending will be on homeware (46% will spend less), clothing (42%) and socialising (41%). But the top areas that consumers plan to spend more are on Christmas dinner (25% will spend more), food and drink at home (24%), and presents (23%).

Robyn Duffy, senior analyst at RSM UK, added: ‘Families stand as one of the most vulnerable groups amidst the current economic landscape. Almost all respondents (91%) who are parents were concerned that high-interest rates over the next 12 months would significantly impact discretionary spending. Additionally, 93% expressed apprehension about the escalating cost of goods affecting non-essential expenditure.

‘While the Consumer Price Index is on a downward trend, it merely signifies a deceleration in the pace of rising costs. Overall, expenses continue to escalate year on year, placing a considerable strain on families. Although interest rates may have reached their peak, giving a semblance of stability, the prevailing outlook suggests they will persist at elevated levels for some time yet. These factors are particularly burdensome for families who are grappling with additional mouths to feed, childcare expenses, and essential clothing needs, with a larger portion of their income dedicated to essential spending.'

*credit cards, buy now, pay later arrangements, overdraft or taking out a loan.