M&S Christmas cheer hit by uncertain outlook for UK

Marks & Spencer (M&S) has warned of uncertainty in the UK economic outlook, casting a shadow over the company's strong Christmas sales. The company stated it is facing "higher costs" from taxes like National Insurance, along with "uncertainty in the outlook for economic growth, inflation and interest rates."

Meanwhile, Tesco has confirmed that the increase in National Insurance contributions announced in the Autumn Budget will add £250 million to its business costs annually. The British Retail Consortium (BRC) has warned that the budget measures mean there is "little hope of anything other than rising food prices" in the second half of 2025. The association stated that the costs of an upcoming April wage rise and changes to National Insurance taxes will be passed on to consumers.

M&S Chief Executive Stuart Machin said that the company expects costs to increase: "But we will look to minimise passing costs onto consumers as much as we can in both food and clothing." He also stated that "the overall mood of our customers remains subdued." Bakery chain Greggs echoed similar sentiments in a trading update, saying that "weakening consumer confidence continues to impact high street footfall and spend." Greggs indicated that wage increases will add to overall costs and said it will monitor this to determine whether it will lead to price increases for customers.

During the crucial Christmas period, M&S saw like-for-like food sales rise by 8.9% and home and beauty product sales rise by 1.9%. Total sales were up 5.6% in the 13 weeks to December 28. However, M&S shares fell more than 6% due to concerns about the economic outlook. The BRC predicts that food price inflation will rise from 1.8% last month to 4.2% in the second half of this year, with prices for vegetable oils, orange juice, butter, and coffee expected to continue to rise.

Tesco Chief Executive Ken Murphy announced a strong Christmas trading period on Thursday, but was cautious about prices. "We are not saying there won't be inflation," he said, "we are saying we will do our best to minimise the impact." He indicated that price increases are influenced by a range of factors including raw materials, energy costs, wages, and tariffs. "So, 'we don't know' is the short answer to the inflationary environment," he said. Tesco reported a 4.1% rise in UK sales in the six weeks to January 4, with food sales up 4.7%. The company expects full-year operating profits to reach £2.9 billion.

Greggs' Christmas sales failed to meet expectations, rising just 2.5% in the three months to December 28, causing its shares to plunge 11.2%. Meanwhile, discount retailer B&M said in an update that its like-for-like sales in the UK fell by 2.8% in the three months to December 28. It also lowered the top end of its annual profit forecast. B&M shares plummeted 8.5%. British Retail Consortium chief executive Helen Dickinson said the lobby group's modelling, combined with forecasts from 52 chief financial officers, led it to predict a significant rise in food price inflation in the second half of the year. "With retailers facing £7bn in increased costs from the budget, including higher employer national insurance, the national living wage and new packaging taxes, there is little hope of anything other than rising prices," she said.

However, the Treasury stated that food inflation "has fallen from a peak of 19.6% under the previous government to just 1.9%". It said the Labour government is "now focused on putting more money in people's pockets by growing the economy". The lobby group stated that food price inflation was 1.8% in December, its lowest level since November 2021. The BRC uses a different basket of goods to the official data from the Office for National Statistics to measure inflation, but they are broadly similar. The BRC said that overall prices in shops fell in the run-up to Christmas, but this was attributed to deflation in non-food goods. The rate of increase for fresh food, such as fruit and vegetables, accelerated to 1.2%, while inflation for store cupboard goods was 2.8%.

Finally, the article also provides some shopping tips: check your cupboards to see what you already have; look in the reduced section first to see if there is anything you need; buy items that are close to their best before date, as these will be cheaper, and make the most of your freezer.