Retailers heading into the Golden Quarter should embrace it with cautious optimism, according to two new major shopping reports. New data from Shopify’s Holiday Retail Report 2025 and VoucherCodes’ Shopping for Christmas Report, combined with the latest ONS inflation figures, shows that, although consumers plan to spend more overall, confidence remains fragile as speculation around the Autumn Budget weighs heavily on household sentiment.
Shopify’s research, based on 18,000 global consumers and 7,500 SMBs (including 2,000+ in the UK), shows that Brits plan to spend £181 across Halloween, Black Friday and Christmas, up from £159 last year despite ongoing cost-of-living pressures. Businesses share the positive outlook, with 80% of UK retailers expecting higher sales than last year. Hybrid shopping is now mainstream, with 41% of shoppers planning to split purchases evenly between online and in-store. Meanwhile, AI is emerging as a key shopping tool, with two-thirds of consumers planning to use it for inspiration and deals. However, 74% still prefer buying from people.
Festive sales increase but volume dips
VoucherCodes’ forecast (based on a nationally representative sample of 2,000 UK consumers, combined with data from GlobalData’s own quarterly consumer sentiment tracking) tracks along similar lines. Although festive retail sales are expected to rise 3.2% year-on-year, sales volume is predicted to fall by 0.3%, the first decline since 2023. Their data also shows that the UK is set to outperform all other major European countries in total spend, reaching £91.12bn, which is £16.34bn higher than Germany (£74.78bn). However, Spain will lead on growth rate at 3.8% YoY, just ahead of the UK’s 3.2%, with Germany (2.4%) and the Netherlands (3.0%) also seeing strong uplifts.
Christmas gifts will account for the largest spend per household, with £11.59bn forecast (+2.1% YoY) – an average of £443 per household and 50.5% of all Christmas sales. Unsurprisingly, toys top the list at £2.13bn, followed by electronics at £2.03bn. Food and drink spend is expected to hit £8.36bn, the fastest-growing category at +3.6% YoY, while holiday travel accounts for £2.36bn. Decorations remain the smallest category at £0.63bn, though they will see their first growth since 2021.
Online shopping continues to surge, with sales forecast to grow 4.7% YoY, double the growth rate of offline (+2.3%). Despite this, 62.7% of festive spend will still take place in-store, totalling £57.1bn, while online sales are expected to reach £34bn.
Challenging economic backdrop
However, the backdrop remains challenging. ONS data shows inflation stuck at 3.8% in September, nearly double the Bank of England’s target, with food inflation easing to 4.5% from 5.1% – its first decline since March. While this offers some relief, prices are still rising year-on-year, and consumer confidence is under pressure. Research from UserTesting found 60% of shoppers doubt their income will keep pace with costs, and 46% plan to cut back on discretionary spending.
Adding to uncertainty is the looming Autumn Budget on 26 November, with speculation over tax rises and business rate changes dampening sentiment. Retail analysts warn that this could curb festive spending, with consumers tightening their belts in anticipation of additional pressure on household budgets. “Rising inflation and a potentially taxing Budget is weighing on the minds of many households planning their Christmas spending,” noted Helen Dickinson, chief executive of the British Retail Consortium.
The data from the two reports, however, suggests that retailers have cause for optimism about the upcoming holiday season. Indeed, for retailers, this is a “moment of renewal”, according to Deann Evans, managing director, EMEA at Shopify. “Demand is returning, and confidence is stirring, but shoppers are more discerning than ever and will be selective with where they spend,” she said. “With consumer optimism changing the attention economy, businesses must ensure their holiday retail strategies cut through the noise and take advantage of increased spend this year.”
Retail strategy needs to be based round AI-powered shopping, and meeting consumers’ appetite for discovery. “Shoppers no longer think in channels, the lines between online and in-store have blurred,” Evans added. “They expect seamless checkout, effortless transitions, and small moments of delight throughout the journey. Brands that remove friction, meet customers where they are, and add value before and after the sale will be the ones to win loyalty this season and beyond.”
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