Key events
McKevitt added:
We’ve all got our own festive favourites, but it seems that age differences come into play too. Under 45s are far more likely to pick up a sausage roll, and they also go for a slightly more mediterranean spin, being the most likely to reach for panettone as well as antipasti and party food as part of their Christmas shopping. Meanwhile over 45s account for the majority of Christmas cake and fortified wine sales. The seasonal biscuit, however, knows no bounds appealing across the generations.
More people did some of their Christmas grocery shopping online, with 5.6 million households opting for delivery or click and collect services on at least one occasion. Online spending for the month reached a record £1.6bn.
As a result, the online grocer Ocado boosted its sales by 9.6% over the 12 weeks to 29 December, taking its overall market share to 1.8%.
Discount retailers Lidl and Aldi achieved their highest ever Christmas market shares at 7.3% and 10% respectively. Lidl secured the fastest footfall growth of any retailer as spending through its tills climbed by 6.6%. Aldi’s sales were up 2.9%, as it attracted an additional 315,000 customers to its stores.
Britain’s largest grocer Tesco enjoyed a 5% increase in sales and gained the most market share, now at 28.5%.
Sainsbury’s also did well, achieving its highest share since December 2019 at 16% thanks to sales growth which outpaced the market at 3.5%. Morrisons sales rose by 0.4% with its share at 8.6%, while Asda now holds 12.5% of the market.
Waitrose’s market share remained at 4.6% with spending increasing by 2.1%. Iceland’s sales rose by 1%, giving the frozen food specialist a 2.3% share. Convenience retailer Co-op’s portion of the market is now 5.3%.
Grocery price inflation in Britain rises to highest since March – Kantar
Grocery price inflation in Great Britain rose to 3.7% in December, the highest since March but this did not stop people splashing out on festive fare, according to retail analysts Kantar.
The average household spent £460 on take-home groceries, a record high, this Christmas. Overall take-home sales at the grocers rose by 2.1% over the four weeks to 29 December compared with the previous year.
Fraser McKevitt, head of retail and consumer insight at Kantar, said:
It was a solid Christmas at the supermarkets with sales surpassing £13 billion during the four weeks of December for the first time ever, showing people were clearly in the mood to celebrate and spend. However, despite the festive cheer, grocery price inflation has ticked up to 3.7%, its highest level since March 2024.
In contrast to reports of disappointing footfall across the rest of the high street, it was a very different story in the world of grocery. The average household made nearly 17 separate shopping trips this December, delivering the busiest month for the retailers since the pre-lockdown rush in March 2020. As anticipated, Monday 23 December was the most popular shopping day of the year, with sales a whopping 30% higher than any other day during 2024.
People were willing to splash out that little bit more than usual, as sales growth for branded goods accelerated to 4.2%, while premium own-label lines jumped by 14.6%. The latter now account for a record 7% of all sales, as nine in 10 households bought at least one of these products in December.
Sparkling wine and champagne were the stars of the festive drinks trolley, with sales up by 4%, but 11% of the population bought a no or low alcohol drink, up from under 10% last year.
Despite the warning of slowing sales growth in the coming year, shares in Next have jumped by more than 4%, after the UK fashion and homeware retailer upped its annual profit forecast for the year to January by £5m.
It is the biggest riser on the FTSE 100 index.
Charlie Huggins of the investment service Wealth Club, said:
Next has enjoyed a strong Christmas with its online business seeing an acceleration in sales growth in the fourth quarter, both in the UK and overseas. The year ahead is forecast to be more challenging, but Next still expects to grow sales and profit. It is a classic example of a strong business getting stronger.
Next has pulled another rabbit out of the hat this Christmas, beating its sales forecasts once again. More important for investors is the guidance for the coming year.
Calendar year 2025 is likely to be a bloodbath for the UK retail sector. The autumn budget means retailers will face a significant increase in employee costs and many will not be able to offset this. Next stands apart for its ability to do so, with its high margins, strong overseas growth and efficiency initiatives all helping it to preserve profitability.
Next has also warned it will need to put up prices in the year ahead. Many other retailers are likely to follow suit. This is likely to add to inflationary pressures and could encourage consumers to tighten their belts in 2025.
Overall, the UK retail sector sits between a rock and a hard place. Costs are going up, margins are likely to come down and consumers face an inflationary squeeze. Next though is well placed to weather the storm. If any retailer can thrive in this environment, it’s probably them.
Here’s some instant reaction to the Halifax house price data.
Tom Bill, head of UK residential research at Knight Frank, said:
The current rate of house price growth will come under more pressure as higher borrowing costs triggered by the budget start to bite. A number of buyers are still sitting on sub-4% mortgage offers made before October, which has supported demand in recent months.
Activity has also been temporarily boosted ahead of April’s stamp duty increase but a recent dip in mortgage approvals is a sign that cracks from the Budget are starting to show. We recently revised down our UK house price forecast for 2025 to 2.5% to reflect the tougher lending landscape and the fact economic growth is struggling to gain momentum.
Anthony Codling, housing analyst at RBC Capital Markets, noted that house prices rose by nearly £10,000 over 2024.
The fall in December ended a run of five consecutive monthly increases, but with wages expected to rise and mortgage rates to reduce in 2025 we expect house prices to rise in 2025.
The Stamp Duty stampede is likely to underpin prices in the first three months of the year, before the house price baton will be passed onto mortgage rates. There remains uncertainty around the broader macroeconomic outlook, but demand for homes continues to outstrip supply and our love affair with homeownership has not been dented by rising costs of living, higher for longer mortgage rates or the budget.
Amanda Bryden, head of mortgages at Halifax, said:
The housing market was broadly steady at the start of 2024, with house price growth taking off from the summer onwards. In the latter half of the year, house prices grew in response to the falls in mortgage rates, alongside income growth, both leading to financial pressures somewhat easing for buyers. Impending changes to Stamp Duty thresholds have also given prospective first-time buyers even greater motivation to get on the housing ladder and bring any home-buying plans forward. Together, these elements meant mortgage demand picked up, hitting the highest level in over two years and back to levels seen pre-pandemic.
In many areas across the country, house prices were also buoyed by demand outstripping supply, possibly further amplified by homeowners holding off putting their property on the market – perhaps in anticipation of mortgage rates reducing further.
Where does that leave the housing market for 2025? She went on to say:
While the housing market has been supported in recent months by falling mortgage rates, income growth and the announcement on upcoming Stamp Duty policy changes, mortgage affordability will remain a challenge for many, especially as the Bank Rate is likely to come down more slowly than previously predicted. However, providing employment conditions don’t deteriorate markedly from a more recent softening, buyer demand should hold up relatively well and, taking all this into account, we’re continuing to anticipate modest house price growth this year.
Introduction: UK house prices dip for first time since March; Next warns of slowing sales growth in 2025
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK house prices finished 2024 up 3.3% over the year, with the average property value falling slightly in December, according to a major mortgage lender.
The average house cost £297,166, down by 0.2% in December from November, following five consecutive monthly increases, according to Halifax. The annual rate slowed from 4.7% in November.
Northern Ireland showed the strongest annual house price growth in the UK, up 7.4%, to an average of £205,895.
House prices in Wales were up 4.6% year on year, with properties costing £226,646, on average. In Scotland, the annual rate was lower than in the rest of the UK, 2.4% to an average £209,959.
London retains the highest average house price across the country, at £547,614, up 3.3% year on year.
Despite the slowdown, Matt Thompson, head of sales at the estate agent Chestertons, said:
December 2024 was one of the busiest Decembers in years in terms of buyer demand. This was driven by first-time buyers who were keen to get on the property ladder before this year’s changes to Stamp Duty but also by second-steppers, including young families, wanting to upsize.
Next has upped its annual profit forecast by £5m after stronger than expected sales online, particularly overseas. However, it also warned that sales growth will slow this year, and said it will need to raise prices due to the impact of recent budget measures.
The UK fashion and homewares retailer faces a £67m increase in its wage costs in the year to January 2026, and said it will need to push through an “unwelcome” 1% rise in prices as well as operational efficiencies and other cost savings to offset the hit. This will affect sales, it said.
We believe that UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy.
Next reported a 5.7% rise in sales for the nine weeks to 28 December, excluding the impact of a change in timing of its annual discount event, our retail correspondent Sarah Butler reports. It now expects profits for the year to the end of January to rise by 10% to just over £1bn for the first time.
Sales online, including Next branded items and its Label selection of other well-know brands, rose by 6.1% and overseas online sales were up by more than 30% but sales in stores fell by 2.1%.
Next is expected to be among the festive winners as fashion retailers had been expected to have endured a tough end to the year as a mild autumn led to widespread discounting across the high street. The retailer is known for holding out on discounting until late in the season and so may have benefited more from the late arrival of colder weather as well as its strong online service.
We are expecting a flurry of economic data today.
The Agenda
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8.30am GMT: Eurozone, France, Germany, Italy HCOB Construction PMI for December
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9am GMT: Italy Unemployment rate for November (previous: 5.8%)
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10am GMT: Eurozone inflation for December flash (previous: 2.2%, forecast: 2.4%)
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10am GMT: Eurozone unemployment rate for November (previous: 6.3%)
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1.30pm GMT: US Trade for November
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3pm GMT: US ISM Services PMI for December
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3pm GMT: US JOLTs Job Openings for November