Britain is facing a starkly divided festive period, with retailers bracing for a tale of two distinct holiday seasons shaped by the nation's deepening wealth gap.
The Affluent Continue Spending
In affluent enclaves and for businesses catering to higher-income demographics, the outlook remains surprisingly robust. Data reveals a telling picture: average salaries have risen between 4.5% and 6.7% for those in certain employment brackets. Furthermore, despite recent volatility, stock markets are up over 13% since the start of the year, buoying the portfolios of those with significant investments.
This financial cushion allows for continued discretionary spending. The scene in upscale districts mirrors this reality, with restaurants commanding premium prices for simple dishes and luxury hotels selling out at rates of $750 per night. For merchants positioned in wealthy areas or serving the top earners, the holiday season is expected to be strong.
The Squeeze on the Majority
For the vast majority of consumers, however, the story is markedly different. Analysis indicates that rises in hourly wages have been tracking below 3% for over a year, currently sitting at a meagre 2.58%. This directly impacts blue-collar workers and those outside the top income bracket.
Van Hesser, Chief Strategist at KBRA, underscores this divide, noting that the top 10% of earners account for 50% of all spending. The remaining 90% are grappling with soaring costs, pre-existing credit card debt, and minimal participation in any stock market gains. For them, making rent is the priority, with little room for splurging on holiday gifts.
Retail Forecasts Reflect the Divide
Major retail surveys confirm this bifurcated economic reality. While S&P Global Ratings projects a 4% growth in holiday sales for 2025, researchers caution that this increase is largely driven by higher prices, not greater volume. When inflation is factored out, real spending is expected to remain relatively flat.
Similarly, consulting giant Deloitte forecasts growth between 2.9% and 3.4%, a figure that falls below last year's 4.2% growth and the 10-year average of 5.2%. The reasons cited are universal: persistent inflation, economic uncertainty, and the financial strain on average households.
"It's a tale of two economies," said Hesser. "While wealthy consumers continue spending, the less wealthy are pulling back." This is evidenced by earnings misses from fast-casual dining chains and rising unemployment among recent graduates.
For small businesses, for whom holiday sales can constitute up to half of their annual revenue, the demographic they serve and their location will be the ultimate determinant of their festive success.
