Retailers struggled over Christmas as embattled shoppers cut back on spending

The hopes that retailers would have the first good Christmas in three years were dashed on Friday as new figures showed the sector sold far less than expected as shoppers tightened their belts.

One small business owner said that she only had “a couple of sales” from regular customers in the vital month of December as shoppers struggled with the cost-of-living crisis.

Retail sales volumes were estimated to have dropped by 1% in December, the second month of decline, the Office for National Statistics (ONS) said.

It was far worse than the 0.5% rise that experts had been expecting, according to a consensus from Pantheon Macroeconomics.

“December was a whitewash, with only a couple of sales from customers who come back to me every year as they trust that I will do my best and understand the challenges I’m facing,” said Heather Moore, who owns online art shop The Peacock And The Printmaker.

“I am doing a lot of work on my website but I am concerned about the slow pace of sales due to the cost-of-living crisis.”

She was one of the online retailers who faced a double hit as postal strikes meant shoppers returned to high street stores, rather than risk delayed deliveries.

The proportion of online sales fell to 25.4% in December, from 25.9% the month before.

It is the latest sign of the pressure the cost-of-living crisis is putting on households up and down the country.

ONS deputy director for surveys and economic indicators, Heather Bovill, said: “Retail sales dropped again in December with feedback suggesting consumers cut back on their Christmas shopping due to affordability concerns.

“After last month’s boost as shoppers stocked up early, food sales fell back again in December with supermarkets reporting this was due to increased food prices and the rising cost of living.

“Online sales dipped with feedback indicating postal strikes were leading people towards purchasing more goods instore.”

The data showed that shopping volumes fell by 3% in 2022 as a whole, compared to a 5.2% increase in 2021, when the economy was bouncing back from Covid-19.

Spending in non-food shops dropped by 2.1% during the month.

Sales in food stores proved more resilient, with just a 0.3% drop in December. Sales in these shops had risen 1% in November, leading some to speculate buyers were stocking up early for Christmas.

Sales volumes were 1.7% below their February 2020 levels, before the Covid-19 pandemic struck.

Helen Dickinson, chief executive of the British Retail Consortium, said: “Many of the cost pressures bearing down on retailers and their customers remain in 2023, with high energy costs, the war in Ukraine, and domestic labour shortages all taking their toll.

“However, BRC modelling suggests the situation will improve in the second half of the year.”

Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: “Heavy snowfall and intensifying strike action in December likely contributed to the further drop in retail sales, but the underlying picture is weak too.

“The month-to-month fall pushed retail sales volumes 2.5% below their average level in 2019, the largest shortfall since February 2021, when the UK economy still was in lockdown.”