Shop prices will rise in 2025 as the key Christmas trading period failed to meet retailers’ expectations, according to industry data.

Shop sales grew just 0.4% in the so-called golden quarter, the critical three shopping months from October to December, according to the British Retail Consortium (BRC) and big four accounting company KPMG.

Many retailers rely on trade during this period to see them through tougher months such as January and February. Some make most of their yearly revenue over Christmas.

Money latest: MPs to question Shein and Temu

The minimal growth came amid weak consumer confidence and difficult economic conditions, the lobby group said, and “reflected the ongoing careful management of many household budgets”, KPMG’s UK head of consumer, retail and leisure Linda Ellett said.

Non-food sales were the worst hit in the four weeks up to 28 December, figures from the BRC showed and were actually less than last year, contracting 1.5%.

What were people buying?

Food sales grew 3.3% across all of 2024, compared to 2023.

In the festive period beauty products, jewellery and electricals did well, the BRC’s chief executive Helen Dickinson said.

AI-enabled tech and beauty advent calendars boosted festive takings, Ms Ellett said.

What it means for next year

With employer costs due to rise in April as the minimum wage and employers’ national insurance contributions are upped, businesses will face higher wage bills.

The BRC estimates there is “little hope” of covering these costs through higher sales, so retailers will likely push up prices and cut investment in stores and jobs, “harming our high streets and the communities that rely on them”, Ms Dickinson said.

Read more
Budget blamed as job cuts hit ‘four-year high’ and price hikes loom
Could this be the future of farming? Inside Europe’s biggest vertical farm

Separate figures from high street bank Barclays showed card spending remained flat since December 2023, while essential spending fell 3% partly as inflation concerns forced consumers to cut back but also through lower fuel costs.

The majority of those surveyed by the lender (86%) said they were concerned about rising food costs and 87% were concerned about household bills.

More info to come

Numerous UK retail giants will update shareholders on their Christmas performance this week including high street bellwether Next on Tuesday, Marks and Spencer and Tesco on Thursday and Sainsbury’s on Friday.

Here’s a quiz question: how much would you say the supply of non-Russian gas to Europe (including the UK) has gone up since the invasion of Ukraine?

It’s a pretty important question. After all, in the years before the invasion, Russian gas (coming in mostly through pipelines but, to a lesser extent, also on liquefied natural gas [LNG] tankers) accounted for more than a third of our gas.

If Europe was going to stop relying on Russian gas, it would need either to source that gas from somewhere else or to learn to live without it. And while there might, a few decades hence, be a way of surviving without gas while also nursing important heavy industries, right now the technology isn’t there.

For decades, Europe – especially Germany, but also, to a lesser extent Italy and other parts of Eastern Europe – built their economic models on building advanced machinery, with their plants fuelled by cheap Russian gas.

Money latest: MPs to question Shein and Temu

All of which is why that question matters. And so too does the answer. The conventional wisdom is that Europe has shored up its supplies of gas from elsewhere. There’s more methane coming in from Azerbaijan, for one thing. And more too in the form of LNG from Qatar and (especially) the US.

But now let’s ponder the actual data. And it shows you something else: in 2024 as a whole, the amount of gas Europe had from non-Russian sources was up by a mere 0.5% compared with the 2017-21 average.

Read more
Russian gas supply to European Union via Ukraine halted
Energy bills become more expensive

This isn’t to say that there wasn’t more gas coming in, primarily from LNG tankers, most (but not all) of them from the US. But that extra LNG was only enough to compensate for a sharp fall in gas produced domestically, for instance by the UK and the Netherlands. The upshot was that to all extents and purposes, the non-Russian part of the European gas mix was basically flat.

That’s a serious problem, given the amount of gas coming in from Russia has fallen by 37% over the same period. Essentially, Europe’s total gas consumption has fallen by an unprecedented amount without being supplemented from elsewhere.

Now, to some extent, some of that lost energy has been supplemented by extra power from renewable sources. The UK, for instance, saw the biggest amount of its power ever coming from wind and other green sources last year. However, green electricity only goes so far. It cannot heat houses with gas boilers; it cannot provide the intense heat needed for many industrial processes. And look at the numbers in Europe and you can see the consequences.

With the continent having effectively to ration gas, the industrial heart has borne the brunt. Look at chemicals production in the UK and it’s down by more than a third in recent years. Look at energy-intensive industrial output in Germany and it’s down by 20% since the invasion of Ukraine. The continent is deindustrialising, and the shortage of gas is at least part of the explanation.

And that shortage is about to become even more acute in the coming months. Because the flow of gas coming from Russia is going to fall yet further. There are, broadly speaking, four routes for Russian gas into Europe. The Yamal pipelines are old Soviet pipes running through Belarus; the Nord Stream pipes run (or rather ran) under the Baltic. There are pipes going through Ukraine towards Slovakia and Austria and then there’s the newest pipes, running through the Black Sea to Turkey.

As of late last year, only two of these routes were still operational: Yamal had been shuttered following sanctions by both sides in 2022; Nord Stream was damaged by an attack later in 2022. And now, following a failure to renew the terms of a transit agreement between Ukraine and Russia, the Ukraine route has just shut too. The amounts of gas we’re talking about aren’t enormous: around 4% of total European supply, as of 2024. But even so, it’s a further blow and will mean more rationing in the coming months. European deindustrialisation will probably continue or accelerate.

According to Jack Sharples, senior research fellow at the Oxford Institute for Energy Studies: “In the big picture, the loss of 15 billion cubic metres in 2025 for Europe as a whole equates to 4% of supply in 2024. So, enough to push the market a little tighter in the context of a global LNG market that remains tight, but nothing like the impact of losing Russian pipeline gas supply in 2022.”

Still, this isn’t the only challenge facing the market right now. This time last year, the continent had a near-unprecedented amount of gas stored away. But the amount of gas in storage – a key buffer – has dropped rapidly in recent months, partly because it’s been a little colder than in the previous year, partly because gas has had to step in to provide power when the wind dropped and renewables output disappointed.

The result is the continent starts the year with gas storage at a much lower level than policymakers would like – only 71% full. Admittedly this is higher than the nerve-wrackingly low level of early 2022 (54%). And it’s implausible that Europe will actually exhaust its supplies. But it makes it more likely that the continent will have to pay high prices in the summer to replenish its supplies.

Put it all together and you can understand why wholesale gas prices are climbing higher. The UK may not receive any gas directly from Russia, but it’s plugged into this market, so any shortages on the other side of the channel directly affect the prices we pay here too. And those prices are now up to the highest level since the spring of 2023. This is, it’s worth saying, way lower than the highs of 2022. But it’s enough to suggest bills might be heading up soon.

More than half of private sector firms are planning price hikes to help offset looming tax increases announced in the chancellor’s first budget , according to a corporate lobby group.

The British Chambers of Commerce (BCC) warned business confidence was at its lowest level since the market meltdown that followed the Conservatives’ mini budget of autumn 2022.

Its survey of almost 5,000 firms found worries about tax stood at levels not seen since 2017.

Money latest: ‘I work 80 hours a week and my starting salary was zero – but I’ll retire at 50’

Labour had fought a growth-focused election on the back of an improved working relationship with business but there was a widespread sense of shock when the 30 October budget put businesses on the hook for the bulk of £40bn of tax increases.

The new government argued the hikes were necessary to lock in long overdue investment in public services due to an alleged black hole in the public finances inherited from the Tories.

But companies widely warned the higher costs, from measures such as higher employer National Insurance contributions and National Living Wage increases from April, would be passed on to customers and hit wage growth, employment and investment.

At a time when the Bank of England is struggling to cut interest rates due to stubborn cost pressures in the economy, there will be concern among policymakers over the threat posed by potential business price hikes ahead.

The BCC survey found 55% of companies were planning to raise their own sales costs.

Such a move would threaten further upwards pressure on inflation while weak business confidence will also do little to lift the economy out of the doldrums witnessed during the second half of 2024 when government warnings of a “tough” budget ahead were widely blamed for hitting sentiment.

Financial markets currently see just a 60% chance of a Bank rate cut at the next meeting in a month’s time.

BCC director general Shevaun Haviland said: “The worrying reverberations of the budget are clear to see in our survey data. Businesses’ confidence has slumped in a pressure cooker of rising costs and taxes.

“Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months.

“The government is rightly coming up with long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now.

“Business stands ready to work in partnership to make the proposed Employment Rights legislation work for all, but the current plans will add further costs on firms.”

The BCC said the government could help firms absorb the additional pressures in areas such as business rates reform and through infrastructure investment.

A Treasury spokesperson said in response: “We delivered a once in a parliament budget to wipe the slate clean and deliver the stability businesses so desperately need.

“We have ensured more than half of employers will either see a cut or no change in their National Insurance bills, and by capping the rate of corporation tax at the lowest level in the G7, creating pension megafunds and establishing a National Wealth Fund, we are bringing back political and financial stability, creating the conditions for economic growth through investment and reform.

“This is just the start of our Plan for Change which will unlock investment, get Britain building via planning reform, and employ a modern Industrial Strategy to deliver the certainty and stability businesses need to invest in the UK’s growing and high potential sectors. This will make all parts of the country better off.”