The few weeks before Christmas can transform individual balance sheets.
Every year we talk about Christmas as “the most wonderful time of the year” but in terms of the economy, it is also one of the most concentrated bursts of activity in the calendar.
In a few short weeks, we will find out whether households still feel confident enough to spend, whether retailers can salvage a tough year, and whether hospitality businesses will generate enough cash to get through the quiet months that follow.
Survey data suggests UK consumers are planning to spend around £42bn on Christmas this year or roughly £802 per adult once you add up gifts, food, travel and nights out. Of that, about £27bn will go on presents alone, with the average person expecting to spend £514 on gifts.
Across the six-week festive trading window from mid-November to the end of December, total retail sales are forecast at around £91bn, a 3.2% rise on last year meaning that a month and a half at the end of the year now carries a disproportionate share of consumer spending.
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The retail sector is the most visible beneficiary, generating £115bn of economic output in 2024, around 4.4% of total GDP, with sales worth £517bn and around 2.6 million people employed across more than 300,000 businesses. Yet overall growth remains anaemic with retail sales volumes increasing by just 0.7% in 2024 after two consecutive years of decline.
Footfall figures underline how hard retailers must work to capture that spend and across 2024, UK shopper numbers were 2.2% lower than the previous year, the sharpest fall since the pandemic. In the final so-called golden quarter, footfall dropped 2.5% year-on-year which helps explain the heavy discounting we see throughout November and December.
Even so, the few weeks before Christmas can transform individual balance sheets. For example, Aldi reported its best Christmas ever in 2024 with sales of over £1.6bn in the four weeks to Christmas Eve (a 3.4% increase on the previous year) selling 50 million mince pies, 25 million pigs in blankets and 350,000 turkeys.
The hospitality industry – hotels, pubs, restaurants and leisure – is estimated to produce around 4% of UK GDP and support about 3.5 million jobs, making it one of the country’s largest employers. VisitBritain reckons that festive-season domestic breaks alone now generate roughly £2.5bn of spending as millions of people opt for short stays, meals out and visits to Christmas attractions and markets across the UK.
Yet the sector remains financially fragile and UK Hospitality’s member surveys show that by early 2024 around a quarter of hospitality businesses had no cash reserves and a further 29% had less than three months’ worth, even before the crucial festive period.
Christmas also boosts parts of the UK labour market and Tesco alone plans to recruit more than 28,500 temporary staff across the UK this season to handle festive trade. In addition, Amazon is hiring over 15,000 seasonal workers at fulfilment centres and delivery stations, and the Royal Mail is bringing in a further 16,000 people between late October and January to deal with parcels and post.
Add the seasonal hiring of other supermarkets, logistics firms and high-street chains, and it is clear that tens of thousands of short-term jobs (and millions of extra hours for existing staff) depend on the festive rush.
Advertising and marketing spend underline how central Christmas has become to the wider creative economy with expectations that the UK ad spend in the final quarter of 2025 will reach around £12bn, up 7.3% on the previous year and for broadcasters, platforms and creative agencies, the entire year now seems to be shaped around whether festive campaigns land with consumers.
Beneath all these national numbers, the distribution of Christmas spending is highly uneven and people in London plan to spend an average of £1,014 each on Christmas this year, compared with £954 in North West England and £556 in South West England. By age group, younger adults are taking on more of the cost of “making Christmas happen” with millennials expect to spend about £1,011 each, Generation Z around £940 and baby boomers a more modest £577.
However, Christmas can also be a source of financial stress for some with celebration and average gift budgets already having been trimmed back from 2024 and charities and advice agencies expecting January 2026 to see record demand for debt support.
For Wales, where local economies rely heavily on independent retailers, hospitality businesses and tourism, the stakes are significant. If Welsh adults stick to their planned £910 average spend, that represents a multi-billion-pound injection of demand and the key question is how much of that is captured in local high streets, pubs, restaurants, attractions and Christmas markets and how much leaks away to online platforms and out-of-town logistics sheds.
Ultimately, the economic impact of Christmas is about far more than the quarterly GDP release and is instead a stress test of business models in retail and hospitality, of household finances, and of the resilience of town and city centres. More importantly, when shoppers are confident in December then this can give firms the faith to keep investing and hiring, boosting the economy when it enters the new year.
Have a most wonderful Christmas and let’s hope it brings the confidence our high streets and local businesses need. Nadolig Llawen.
