Photographer: Adrian Dennis/AFP via Getty Images

U.K. Inflation Might Be the Grinch That Steals Christmas

  • Household spending in festive season set to fall 0.1%: Visa
  • Inflation continues to outstrip wage growth, pinching pockets

Inflation might be the Grinch that steals Christmas in Britain this year.

U.K. household expenditure is set to fall 0.1 percent from a year earlier during the holidays, according to a report by Visa and IHS Markit published Monday.

The slump will likely emerge as a result of faster price growth and the resulting pinch on incomes. The pound’s fall since the Brexit referendum last year has pushed inflation to 3 percent, outstripping basic wage growth. Add in the first Bank of England interest-rate increase in a decade and shoppers have little choice but to tighten their belts, the report said.

A separate report by the Centre for Economic Performance showed that higher inflation since the EU vote is costing the average U.K. household over 400 pounds ($527) per year.

“Looking back, consumers were in a sweet spot in 2016 -- low inflation and rising wages meant there was a little extra in household budgets to spend on the festive period,” said Mark Antipof, chief commercial officer at Visa. “2017 has seen a reversal of fortunes -- with inflation outpacing wage growth and the recent interest rate rise leaving shoppers with less money in their pockets.”

The CEP report said that the costs of higher inflation have been felt the most in Scotland, Wales, and Northern Ireland, while London has been impacted the least.

    Quotes from this Article
    Before it's here, it's on the Bloomberg Terminal.