Russell Lynch: Shoppers in shape for Christmas spree

Brits will be looking for bargain purchases on Black Friday

Leon Neal/AFP/Getty Images

22 November 2018

Westminster may be in political crisis, but the great British public’s attention tomorrow will be focused less on Brexit than shopping.

When weighing the impact of these turbulent times on the wider consciousness, it helps to retain a sense of perspective.

According to Lord Finkelstein — William Hague’s former speechwriter and an astute commentator — the man on the street thinks about politics for less than five minutes a week.

Hence the agonised deliberations over deals, backstops and confidence votes will almost certainly sail over the head of 98% of us, at the expense of thumb-bashing smartphones and tablets for bargains.

Black Friday has dawned, and I have a sneaking suspicion it may be a good one.

The prevalent retail narrative for this year is an annus horribilis of closures, landlords forced to slash rental bills and short-sellers making merry.

House of Fraser went to the wall, as did Maplin, and Toys R Us. Countless more are struggling, such as New Look and debt-laden Debenhams.

Business rates and rising wage costs have added to the burden, as well as a weak pound for importers. The FTSE 350 general retailers index has lost more than 20% in the past three months, which tells you all about what the City thinks.

Arguably though, those who’ve struggled are the more structurally challenged bricks-and-mortar players in the first place, as the sector inexorably moves online. That’s why most of the big, listed property landlords have been keen to stress how many shopping centres they’ve been selling lately, and the most exposed firm in the sector, Intu, is likely to be taken private for a song.

More pertinently, the high-profile woes of some retailers shouldn’t blind us to the fact the average shopper’s finances are in their best shape for almost a decade. Average regular wages are growing at 3.2% a year, the best since early 2009.

Pay packets have been crushed since the financial crisis, but not this year: with inflation at 2.4%, real-terms pay has seen steady growth since February, recovering from the post-referendum dive for sterling, which sent the cost of living spiking.

Unemployment is also near 43-year lows at just 4.1%, so there are more of us in work to spend their hard-earned as well.

More evidence that we’re feeling chipper about life comes in IHS Markit’s latest survey of household finances, which shows respondents in their most optimistic mood for almost four years.

Even though they don’t feel exactly secure in their jobs, rising wages while inflation beats a retreat “should provide UK households with a purchasing boost as holidays approach”, IHS says.

The Bank of England’s latest inflation report, meanwhile, notes that real incomes have “picked up somewhat” this year and flagged up consumer confidence surveys indicating that households’ expectations of their personal financial situation have improved somewhat since 2017. Households with mortgages have jumped onto cheaper deals even if the Bank is flirting with further rate hikes, giving them more cash to spend.

Admittedly the surprise 0.5% slide in October’s official retail sales, and a blip in the Visa spending figures hint at more caution from the doughty British consumer. But who really throws the cash around in ‘sober’ October anyway?

It’s the interregnum between summer and winter spending. And if you wanted any more indication of what’s foremost in people’s minds, take a look at the Google trends graph. Even at the height of the political meltdown exactly a week ago, users of the world’s most prevalent search engine were typing “Black Friday” into the box more than twice as much as “Brexit”.

People are hardly cowering in fear at a catastrophic breakdown in trading relations with our European cousins. And who seriously believes most people will defer Christmas shopping until the outcome of the “meaningful vote” on Theresa May’s deal?

As for tomorrow, retail analysts at GlobalData reckon more than £10 billion could be spent, some 3.1% ahead of last year. Comparison site Finder.com’s survey of 2000 people goes for a more conservative £7 billion across Black Friday and Cyber Monday, with a lower average spend, but far more heading online to find bargains.

It reckons closer to two-thirds of adults will be taking part, against 36% last year. You can bet retailers will be milking it, with Black Friday having morphed into a week of sales for most firms to ease the pressure on distribution networks.

It’s still early days in the festive shopping season but with 33 days to Christmas, we’re yet to see any profit warnings among the listed players. It’ll be a tooth-and-nail scrap for sales, but then again, it always is.

My money’s on enough MPs blinking after looking into the abyss to back May’s deal while British shoppers spend on regardless. It’ll be Bank rate hikes that get them to put their wallets away next year — not the Brexit bogeyman.

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Russell Lynch: Shoppers in shape for Christmas spree

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