Holiday 2019: UK Retail Outlook—One-Third of Nonfood Sales Set To Be Online

Executive Summary

Continuing our Holiday 2019 series, we preview UK retail over the peak November–December season.

As we write, the nature and timing of the UK’s departure from the EU, which is scheduled for October 31, are unconfirmed, and this adds uncertainty to estimates for the holiday peak.

• An on-schedule exit from the EU at the end of October will provide some (perceived) finality to consumers. In the best case, this could release pent-up consumer demand, which would provide some upside to our estimates for holiday trading. Reinforcing this possibility, consumers confounded economists’ forecasts after the UK voted to leave the EU in 2016 by going on a spending spree that resulted in strong holiday retail sales.
• We expect to see total retail sales grow by around 3.5-4.0% year over year, with the midpoint of 3.75% taking total holiday retail sales to £83.7 billion. This compares favorably to the 3.1% increase last year.
• We estimate some 32.6% of all nonfood spending will be online this holiday season. We expect Internet-only retailers to outpace the increase in total online sales by around 500 basis points.
• For large retail businesses, which account for the bulk of retail sales, we expect growth of approximately 3.0-3.5% during November and December.
• Across a number of metrics relevant to the consumer economy, we see a more positive environment than last year; wage growth has strengthened considerably and unemployment is down.