“Challenging Christmas” predicted for retailers as cost-of-living constraints continue

A Christmas trading forecast from MRI Software says there will be a year-on-year drop in UK footfall in the lead up to December, as households continue to feel cost-of-living pressures.

Footfall across all UK retail destinations is expected to show a decline of 3.2% on a month-on-month basis for September, the largest decline since January 2023.

In October, footfall will also continue to decline by 0.1%, remaining flat from October to November before increasing by 5.1% from November to December.

The forecasted 5.1% rise in footfall from November to December will represent the largest month-on-month increase in 2023, but remains below the increase in footfall of 5.8% in 2022.

Other key predictions include:

• Following Black Friday, the rise in footfall from November to December will result in a 6.5% increase in retail parks and 10% in shopping centres, whilst high streets will rise by 2%.
• From September to December, footfall in shopping centres will average -0.3% below the 2022 level, versus -1.7% in high streets.
• The gap from the 2019 footfall levels will widen marginally to -12.5% across all UK retail destinations from -11% in August, largely due to the resilience of retail parks.
• In high streets and shopping centres, the gap from the 2019 footfall level will remain at a much wider level; in August high street footfall was 13.4% below the 2019 level and 14.8% below 2019 in shopping centres.
• The 2019 gap will widen further by December to -15.5% in high streets and -17.7% in shopping centres.

MRI Software therefore sees a challenging Christmas for retailers and the hospitality industry as Brits tighten their purse strings due to rising bills "that will have started to bite since September".

Financial constraints facing households as a result of high inflation and interest rates "will lead to the drop". While interest rates were not raised in September, around half a million households face the end of their fixed rate mortgages in early 2024, when they know they will face a significant increase in payments.

Diane Wehrle, Insights Director at MRI Software, said: "With this additional financial burden for so many consumers just over the horizon, MRI Software anticipates that this will curtail consumers’ propensity to shop. It is forecast that spending pressure will start to bite from September onwards, with drops in footfall from month-to-month over the three months from September to November, only increasing from November to December in the run up to Christmas.

"In each year between 2009 and 2019, footfall dipped in September from August as a result of a drop in consumer demand following the end of the holiday season and the start of the school term. Both 2020 and 2021 were heavily disrupted by COVID-19 and again in 2022 – but to a lesser degree. However, this year the drop in footfall will be further impacted by the hit on many household budgets due to higher inflation and interest rates.

"The largest hit on footfall will be felt by high streets, which is generally the case in the run up to Christmas as shoppers head to larger shopping centres and retail parks which lure shoppers through a wide range of brands in large stores in a single destination.

“Despite this, we are forecasting that the drop in footfall from 2022 will be of a similar magnitude in both high streets and shopping centres in December (-2.5% and -2.6% respectively).

"However, over the four months from September to December, footfall in shopping centres will average 0.3% below the 2022 level versus -1.7% in high streets."