Spending was below the rate of inflation in the key Christmas month as cost of living pressures hit
Spending in the run up to Christmas was weak, latest retailer and payments card data showed, further illustrating the cost of living pressures affecting purchasing power.
When inflation was factored in, both retail sales and card payment data showed spending rose below the rate of price rises.
While the official measure of inflation was 3.9% in November, spending rose at a slower pace – UK retail sales, as calculated by retail representative British Retail Consortium (BRC) and big four accountancy firm KPMG, increased by 3.6% from 2022.
Similarly, consumer card spending was outpaced by price rises and grew just 2.3% in December 2023, compared to a year earlier, Barclay’s consumer card spending figures showed.
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Positive performance in shops can be attributed to sales, said the BRC chief executive, Helen Dickinson.
“Sales saw a slight uptick in the week leading up to Christmas as consumers scrambled to purchase last minute gifts, particularly online, due to the wet weather.”
Those sales lasted longer and were “deeper” than last year, said KPMG’s UK head of retail, Paul Martin.
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It was due to supermarket promotions that grocery price inflation fell at its fastest rate on record in December.
Such promotions and discounts are “likely to stay with us for a while”, he said.
It was possibly due to earlier discounting, however, that December card spending was at a lower ebb, Barclays said, as retail spending struggled to maintain momentum built up through early discounts in November via Black Friday sales.
Outlets that offered discounts tended to perform positively.
Price cuts, for example, helped supermarkets report record revenues ahead of Christmas, according to Kantar Worldpanel which tracked sales and prices among chains.
Discounting comes due to mounting cost of living pressures, despite the rate of inflation continuing to fall.
Borrowing is at a high not seen in a decade as interest rates were hiked 14 consecutive times in an effort to bring down inflation and energy bills have not come down to pre Ukraine invasion levels.
“The festive period failed to make amends for a challenging year of sluggish retail sales growth, as weak consumer confidence continued to hold back spending,” Ms Dickinson said.
Despite the slowed spending, Barclays set an all-time record for transactions processed per second on 22 December, the busiest day for Christmas shopping .
The figures demonstrated what Christmas presents were most popular.
“In gifting, beauty products were the standout performer, and toys and gaming also sold well,” Ms Dickinson added.
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
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Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
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