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By Richard Evans
As we walk up and down the supermarket aisles stocking up with Christmas goodies or scour the web for our families' presents, the effects on the nation's economy - and the environment - are probably the last things on our minds. But our annual spending splurge during the festive season puts an extra £10bn into the economy - enough money to run the entire National Health Service for over a month. And this is just our extra spending, on top of what we normally buy at other times of the year. 'Retail sales have a strong seasonal component,' says a recent study by the Centre for Economics & Business Research. 'Sales increase strongly in November and December and fall in January. No surprises there, but spending for electronic items and clothing jumps at an incredible 80 and 60 per cent, respectively. Christmas also benefits the economy in other ways. 'Apart from the obvious rise in consumer spending, there is a boost to the labour market from the need for temporary staff over the Christmas season and from staff working overtime,' says Vicky Redwood of Capital Economics, the consultancy. Then there is the small matter of company Christmas parties, the most famous example of which was nationalised banking giant RBS, who allegedly set aside £1m for this year's Christmas bash, despite receiving over £10bn in taxpayer funds last month. The other side of the coin, however, is that because people usually take extended time off around Christmas period, the economy takes a £20bn hit in lost productivity. How do we usually spend our money? Each household in Britain will spend just under £400 on Christmas in the shops this year, making a total of £10.6 billion, according to the CEBR's report. More than two thirds of this will be on items that will end up under the Christmas tree. Perhaps surprisingly, our consumption of alcohol and tobacco over the Christmas season will put a relatively modest £530m into the economy, as the average household spends just an extra £20 on these vices. But our spending on food and other drinks is much higher - at £84 per household on top of normal expenditure, this will contribute about £2.2bn to the economy. The next largest contributor, according to the study, is clothing. Households typically spend £76 extra on all those socks and woolly jumpers, giving retailers a useful boost to their turnover of just over £2bn. Perfumes are also popular - we'll spend another billion pounds on 'personal care' products this Christmas, or £38 per household - while books and newspapers account for almost as much at £900m, or £34 for each household. Further down the scale, the study estimated that we will spend a total of £430m (£16 per household) on electronics such as audiovisual devices and cameras, £370m (£14 per household) on games and toys and £190m (£7 per household) on software and games. The remaining £2.9 billion (£110 per household), intriguingly, goes on 'other products'. What a waste... Christmas can be a time of enormous waste. It is easy to buy too much food, for example, party because the shops are closed for longer and partly because it is more difficult to gauge your needs accurately if you are expecting guests - especially if you don't know exactly how many will come or how long they will stay. 'The credit crunch clearly means that people are more likely to buy only what they need over Christmas when it comes to food etc,' Redwood adds. 'This means less waste, as well as fewer unwanted Christmas presents.' Still, despite the fugal tone to this year's festive period, we'll still be producing incredible quantities of waste. Charity Action for Sustainable Living estimates that around six million Christmas trees are bought in the UK each year, but only 750,000 of them (12.5%) are recycled. That amounts 9,000 tonnes of unnecessary waste: five times the weight of the London Eye. Meanwhile, each year around 750 million Christmas cards are sold. That's around 250,000 trees. Around 15 per cent of these cards are recycled - enough to save around 1,750 tonnes of rubbish. As for wrapping paper, we're talking 50,000 trees, or 8,000 tonnes of the stuff, according to Government agency Defra. How much is that? Enough to gift-wrap the island of Guernsey. Overall, according to The Institute of Environmental Assessment and Management, this Christmas will create three million tonnes of rubbish: enough to fill 400,000 double-decker buses. How will the downturn affect spending? Families will spend less on Christmas this year than last as a result of the economic crisis. Last year we put a total of £10.9 billion, or £413 per household, into the economy over the festive season, compared with the estimates of £10.6 billion and £399 per household this year. This means that we will spend 2.6 per cent less this year. The contrast with 2006 is even more marked. Then we spent a combined £11.3 billion on our Christmas shopping, or £433 per household. But the amount we'll spend this year on food is expected to be higher than last year's total. 'Despite the overall cut in Christmas spending, households will spend on average £105 on food [and drink] compared with £97 last year as prices for food and beverages have risen significantly,' the CEBR predicts. 'Households will reduce their spending on big ticket non-food items such as household electronics to £269, compared with £290 spent over last Christmas.' Consumers will delay their buying decisions for as long as possible this year, partly because they will be buying on credit rather than spending money they already have, according to one retail expert. Many also plan to take full advantage of the war being waged between the High Street's biggest retailers, with 20 per cent off sales becoming the norm. '[Consumers] will postpone their Christmas shopping to the last moment,' says Dr Hugh Phillips, a consultant who specialises in retail psychology. 'Then it is a question of whether they have already suffered from the downturn - through losing their job or being put on short-time working, for example - and how desperate they feel about their future. It is all a question of consumer sentiment. 'Christmas is traditionally funded by debt - the credit card. So it is dependent on how far the average consumer will advance that debt. Research shows that consumer debt depends on consumers' confidence in their ability to pay it off - which in turn depends on their employment prospects. In other words, their Christmas expenditure level is dependent on the expectation that they can pay it off next year.' But he points out that retail sales have declined only very slightly, according to the latest figures. 'The reason is that the European consumer, in contrast with the American, tends to 'trend' rather than fluctuate in response to economic conditions,' says Dr Phillips. However, two sectors will act differently, he adds. 'Spending on "conspicuous consumption" products will take a beating. These are out of fashion in hard times, irrespective of your income. But we are much less likely to cut back on spending on our children.' Some adults may not get an office party this year, but don't worry children - your Christmas is safe. Useful links: |
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