Key events
Just in: full-day retail footfall data for Boxing Day has just been released, confirming that shopper numbers fell.
There was a -4.9% drop in footfall across all UK retail destinations compared to Boxing Day last year, MRI Software reports. That implies a late-evening surge in shoppers, as footfall up to 8pm yesterday was down by -7.6%.
German business associations see their current situation as worse than it was a year ago and remain pessimistic about the coming year, economic institute IW has reported today.
A new survey from IW found that 31 out of 49 business associations see the current situation as worse than in 2023 and 20 out of 49 industry representatives expect lower production next year, while only 16 expect an increase.
IW director Michael Huether says:
“The German economy won’t get off the ground in 2025 either.”
“Germany has faced various crises over the last 100 years, but none have been as complex or had as many causes as the one we are experiencing now,” says Michael Hüther, head of the German Economic Institute (IW).
🇩🇪 Economic sentiment has hit rock bottom, and prospects for 2025…
— Solix Trading (@Solix_Trade) December 27, 2024
German firms are suffering from high for energy, labour and materials costs, IW says, while the geopolitical uncertainty is hampering exports, the institute added. The political crisis in Germany is also hurting investment, with a general election set for February.
Many European stock markets have reopened after the Christmas break, but there’s not much festive excitement this morning!
In London, the FTSE 100 index of blue-chip shares has dropped by 22 points, or 0.27%, to 8113 points. Mining company Anglo American (-1.5%) and online property portal Rightmove (-1.4%) at the top fallers.
Germany’s DAX index has dipped by 0.1%, while the wider Stoxx 600 index was flat
Japan’s Nikkei hits five-month closing high over 40,000 points
In Tokyo, Japan’s Nikkei share average has hit a five-month closing high today.
The Nikkei gained 1.8% today to finish at 40,821.16, its highest close since July 17, with investors optimistic they’ll see corporate growth in the coming year.
Kentaro Hayashi, senior strategist at Daiwa Securities, says:
“The market cheered recent news of domestic firms, such as merger talks between Honda and Nissan. That drove expectations that Japanese firms will continue to improve investor returns.”
Jasper Jolly
Away from the retail sector, Britain’s steel industry is calling on the government to buy more domestic produce, as it prepares for a major expansion of offshore wind generation.
Only 2% of the steel used in British offshore wind projects over the past five years was made in the UK, and the industry wants ministers to aim to dramatically increase that proportion.
The business secretary, Jonathan Reynolds, is preparing to publish a new steel strategy in the spring that will look at how to “increase steel capacity and capability in the UK” even as the industry struggles with the costs of decarbonising.
Gareth Stace, the UK Steel chief executive, said there was a “great opportunity” in offshore wind, but the industry wanted the Labour government to pledge to favour British-made steel in its procurement.
Begbies Traynor also reports that an additional 28,747 retail businesses in the UK are in ‘significant’ financial distress – less severe than ‘critical’, but still concerning.
Begbies Traynor partner Julie Palmer says:
“As we look ahead to 2025, the outlook is very mixed.
While some retail businesses are adapting to these pressures, many others remain vulnerable, especially in the face of rising wages, online competition from the likes of Temu and Shein, and fragile consumer confidence. With mounting challenges on the horizon, weaker businesses are likely to find little joy as we enter the New Year.”
More UK retailers fall into ‘critical financial distress’
The number of UK retailers facing “critical” financial problems has risen by more than 25% in the last three months, new data shows.
Highlighting the pressures on the sector, after a disappointing Boxing Day, restructuring specialist Begbies Traynor has reported there were 2,124 retailers in “critical financial distress” in the first 11 weeks of the October-December quarter.
That’s a jump from 1696 in July-September, but slightly lower than the 2,142 recorded in the last quarter of 2023.
Begbies, the UK’s largest insolvency practitioner, says the quarter-on-quarter increase reflects subdued consumer confidence and rising costs.
Julie Palmer, partner at Begbies Traynor, says retailers are under ongoing pressures, including rising operational costs and squeezed consumer spending.
Palmer adds:
“Moreover, the weaker-than-expected retail sales performance in November, traditionally a critical month for the sector, further underscores the tough trading conditions, as consumers hold off on purchases amid low confidence and rising prices.
“Adding to this uncertainty, the measures announced in the Autumn Budget, including the planned increase to employers’ National Insurance Contributions, will significantly dial-up the challenges faced by these businesses. These changes, alongside increases to the Minimum Wage, will negatively impact cash flow and, consequently, we expect elevated insolvency levels across this sector during 2025.
“Even for more resilient businesses, the pressures remain relentless, and many will likely face financial challenges next year as they navigate these compounded difficulties.
Introduction: Boxing Day footfall drops
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
Cost-of-living pressures have been blamed for a drop in shoppers hitting the UK high street yesterday.
The traditional Boxing Day sales seem to have been something of a flop, with a 7.6% drop in footfall compared to 26th December 2023 as of 8pm last night, according to data from MRI Software.
Jenni Matthews, marketing and insights director at MRI Software, explains:
The decline in Boxing Day activity may reflect a shift in consumer behaviour, influenced by the ongoing cost-of-living crisis.
With footfall levels +18.1% higher in all UK retail destinations on Christmas Eve this year compared to Christmas Eve last year, suggesting that many shoppers concentrated much of their spending in a pre-Christmas rush.
There are other factors. For starters, online shopping means many retailers began their Boxing Day sales late on Christmas Day (handy for those sober enough to operate a computer or mobile phone).
Shoppers had been expected to spend £3.7bn on Boxing Day, only a 1.3% increase on last year.
Secondly, many stores remained closed on Boxing Day – including John Lewis, Marks & Spencer, Next and Aldi – to give their staff more of a Christmas break.
As Kien Tan, a senior retail adviser at PwC, puts it:
“The key thing about footfall numbers is that they don’t tell the whole story.
Lots of shops are now closed on Boxing Day. It used to be just John Lewis, but now Next, M&S and most big supermarkets close.”
Thirdly, rising concerns about Christmas consumerism may have encouraged some potential shoppers to stay at home.
Yesterday’s slump in the number of people tramping around the shops could show a return to the declining levels of excitement about Boxing Day that were recorded before the Covid-19 pandemic.
As Matthews explained to PA Media:
“We’ve got to bear in mind that (last year) was our first proper Christmas without any (Covid-19) restrictions or limitations.
“Figures have come out that things have stabilised, we’re almost back to what we saw pre-pandemic.”
