Cost Of Living Christmas: Reason For Christmas Cheer

Welcome to the final article in our Cost Of Living Christmas 2023. Over the last few weeks we have looked at what 2023 has been like for consumers, the retail and hospitality sectors; and also which other sectors have had a notable year. 

In a year of record insolvency rates, high inflation, sharply increasing interest rates, rapidly rising costs, and that has inspired an article series named Cost Of Living Christmas it is perhaps not a surprise that a negative outlook this Christmas will be the case for many consumers and sectors.

The retail and hospitality sectors require a strong Christmas trading period, with it accounting for a significant portion of many companies annual revenue and that is especially true this year. Unfortunately, as discussed in the first two articles in this series, that does not seem to be in the cards, with most research pointing to consumers cutting back due to reduced spending power, rising costs and worry over their financial future.

But is it really all doom and gloom or is there some reason for Christmas Cheer? In this article we will look at some of the reasons for UK business to be hopeful for a merry Christmas and a better 2024.

Spending last Christmas was better than expected

Last year ended on a similar dour note to 2023. Whilst the public had yet to really suffer the worsening cost of living crisis and rising interest rates, there was higher inflation and household energy bills were at an all-time high. Research by Revolut found that 60% of UK adults planned to cut their Christmas spend in 2021, a significantly larger number than this year.

Despite this, UK consumers opened their wallets and spent £82.2 billion over the festive period. This was much more than feared and roughly the same as in 2020.

This will give those in hospitality and retail plenty of reason to be hopeful that once again UK shoppers will defy expectations.

Full Expensing is here to stay

Full expensing allows businesses to deduct the cost of qualifying capital investments from their profits in the year of purchase, from manufacturing machinery to computers or office furniture, and helps companies that are seeking to grow and/or modernize. This scheme equates to a tax saving of roughly 25% and made making such big investments into their company a much more attractive proposition for owners.

This scheme was originally introduced on a temporary basis but was made permanent in the 2023 Autumn Statement based on its success.

£4.5 billion of funding earmarked for UK manufacturers

As a high energy use sector and one especially struggling from rising costs and supply chain disruption, manufacturing has had a tumultuous few years. Many were worried that the industry was poised to cross a tipping point in 2024 and experience rates of business failures inline with the industries currently worst effected by the economic downturn.

A significant lifeline has been extended to the manufacturing sector by Chancellor Jeremy Hunt in his Autum Statement, where he unveiled a £4.5 billion funding package for the manufacturing sector, aimed not just to steady the ship but to drive innovation and growth to secure a strong future for the industry.

New investment zones for manufacturing

More good news for manufacturing is the creation of three new investment zones for the industry: Greater Manchester, East Midlands, and West Midland. This will generate £3.4 billion in private investment and create 65,000 jobs within a decade.

Frozen alcohol duty and the Euros

Pubs and bars have been buoyed by the freezing of alcohol duty until August 2024. This will allow drinking establishments an easier path to profitability and has led to increases in share prices for many hospitality chains, brewers and distillers.

Falling into the six months of frozen duty are the 2024 Euros, the European FIFA international football tournament. Pubs and bars will expect for a sharp increase in business during this, especially if England progress far through the tournament. The Rugby World Cup this year saw England beat bad form and progress further than expected, which also led to an unexpected rise in performance for UK pubs and bars. 

Merry Christmas to all our readers

That brings us to the end of our Cost Of Living Christmas 2023 series, we thank you for joining us and hope you have found it informative. Whilst it has been a challenging year we are glad to end it on a more positive note with this article o reasons to have Christmas Cheers.

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