Retail analysts Verdict Research is forecasting that UK shoppers will spend more this Christmas than last, despite the current financial crisis, but this extra spend will be driven by the higher cost of food.

Faced with a more expensive Christmas feast, consumers will be selective with food shopping and careful with their gift purchasing, buying fewer items of both, says the analyst. This means retailers will have to fight much harder for a share of their Christmas spend.

Verdict forecasts that UK consumers will spend £82.3 billion with retailers in the final quarter of 2008 or £1,363 per head. Though this is an increase of two per cent on 2007, it is the second lowest growth rate in 20 years and the £1.6bn extra shoppers will be spending will be more than eaten up by food inflation.

Maureen Hinton, lead analyst at Verdict, said: “Not surprisingly food and grocery accounts for the largest share of shoppers’ spending over the Christmas period (38 per cent) and, with food inflation running at 6.3 per cent this quarter, consumers are facing a more expensive Christmas feast. But unavoidable though this extra expense will be, shoppers will be more careful in what they buy, balancing spending on treats with cutbacks on everyday foods.”

Stripping out the impact of inflation, volume growth in the sector will be only 1.3 per cent, less than half the 2.8 per cent achieved last year. With cost inflation running at more than three per cent, Verdict predicts the squeeze on retailers’ margins will be intense.

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