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Shoppers and retailers are set for a “challenging” year ahead, according to a leading trade body.

Shoppers and retailers set for 'challenging' 2024, says BRC
Shoppers and retailers set for ‘challenging’ 2024, says BRC

The British Retail Consortium (BRC) has warned that higher living costs will continue to squeeze household budgets.

Its boss pointed out that firms will also face higher business rates as well as potential disruption to shipments via the Red Sea.

Despite a flat Christmas, other figures suggest that people are still willing to spend more on holidays in 2024.

Helen Dickinson, chief executive of the BRC, suggested that “weak consumer confidence continued to hold back spending” over the key festive trading period.

Across the UK, retail sales increased by just 1.7% in December, significantly lower than the 6.9% seen the year before, according to the BRC-KMPG retail sales monitor.

There was a slight boost in takings the week before Christmas, with a scramble to buy last-minute gifts, particularly online, due to the wet weather.

Beauty products proved popular as presents, along with health and personal care items, while clothing and jewellery were ditched, the BRC said.

The post-Christmas sales failed, however, to draw in customers to spend more on bigger-ticket items like furniture or homeware.

‘Battening down the hatches’

Paul Martin, UK head of retail at KPMG, said “cautious consumers are battening down the hatches” so retailers should expect demand to be down in the first few months of 2024.

Despite falls in inflation, which measures how quickly prices rise, or recent cuts to National Insurance rates, “the constant drop of economic challenges [consumers] have faced over the last two years has finally come home to roost,” he said.

Separate figures released on Tuesday also suggested that shoppers held back on buying presents over Christmas, prioritising saving their money for travel, tickets for gigs and festivals instead.

Holiday bookings, Glastonbury ticket sales and cinema releases such as Wonka all helped boost spending in December, although the shopping frenzy “fizzled”, according to data from Barclays.

Consumer card spending grew 2.3% year-on-year in December, well below November’s growth of 2.9%.

Clothing and department stores saw sales drop last month – down 2% and 0.2% respectively – after a spike in November, perhaps partly due to retailers starting their festive discounting earlier on.

But spending on entertainment and travel soared by 12.3% and 14.1% as consumers booked experiences and getaways, with airlines and travel agents faring particularly well.

According to Barclays, beach holidays, city breaks and adventure holidays are among the most popular types of trips people are booking.

Diane Palumbo, sales and marketing director at Skiworld, recently told the BBC’s Wake Up to Money programme that trade had picked back up a little bit in recent months.

She said that it “could be better” though, with “some signs of the cost of living crisis in people’s future decisions”.

In entertainment, digital subscriptions saw strong growth with consumers staying at home during the holidays and catching up on the latest releases such as The Crown and Chicken Run: Dawn of the Nugget.

On Tuesday, the Digital Entertainment and Retail Association said streaming and digital services drove a 7% rise in UK music, video and games sales to £11.9bn.

The fastest-growing sector was video, driven by subscription to the likes of Netflix, Amazon Prime Video and Apple TV.

Music sales were also up 9.6%, hitting £2.2bn – the highest level seen since 2002 as Spotify, Amazon, YouTube and Apple increased subscription revenues.

The best-performing track was Miley Cyrus’s Flowers, while vinyl sales also stood out.

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