In austerity-hit Britain, holiday shoppers shorten their lists

Sitting beneath a vast, glittering star in an out-of-town shopping mall only days before Christmas, Pauline Hedges grimaces as she talks about a task she normally enjoys: choosing presents for her family.

Last month, her son lost his job as a software salesman and her two other children are feeling the pinch as well.

"We're all a bit anxious at the moment so we've agreed to cut back and keep presents really small this year," she says.

This is not what retailers – or many government economists – want to hear.

Christmas, traditionally a time of some profligacy in Britain, is a crucial trading period for retailers. And retail is pivotal to the economy at large, with consumer spending constituting two-thirds of all spending.

But one year after Britain introduced a sharp austerity program to reduce a gulf between government income and spending by 2015, Britons have shortened their shopping lists. Wage increases that have lagged behind galloping inflation, rising unemployment, and the effects of a eurozone crisis that is lowering demand from continental Europe have all contributed to fewer customers in the shops.

Last October, David Cameron's Conservative government announced measures including a cut of 19 percent on average across departments, with welfare aid to Britain's poorest people hit particularly hard. Coupled with $45 billion in tax hikes over five years, $125 billion in cuts were expected to eliminate, for the most part, Britain's $245 billion deficit.

But the remedy isn't working as quickly as had been hoped. Last month, the government announced that it will extend its punishing austerity drive. Chancellor of the Exchequer George Osborne said that the foundering economy had thwarted his goal of nearly eliminating the deficit by 2015, and that the austerity drive would continue until 2017.

He added that pay raises for public-sector workers would be capped and that job losses in the sector would rise to 710,000 from an original estimate of around 400,000.

A day later, a mass strike, the first in Britain in 30 years, closed schools and forced hospitals to postpone nonemergency operations.

The Grinch is in town

Indeed, the run-up to Christmas this year has been marked by a slew of grim news. The Office for Budget Responsibility, which Mr. Osborne set up to provide independent economic projections, said growth this year will be 0.9 percent instead of the 2.3 hoped for earlier. Unemployment has hit a 15-year high, and inflation reached 5 percent in the fall.

Though prices have since eased, thanks in part to supermarket price wars and lower gas prices, economists warn that with inflation still more than twice the rate of average salary increases, households will remain comparatively hard-up.

"Everything's got more expensive, especially bills," says Ms. Hedges. "But I think we're also just uncertain about things – even my small grandchildren worry about the economy."

Free church caroling services

As a result, there are indications that Britons are looking for alternatives to shopping to celebrate this year. Although only 20 percent of Britons describe themselves as members of the Church of England – down from 40 percent in 1983, according to the British Social Attitudes Survey – carol concerts appear to be growing more popular, according to anecdotal evidence from churchgoers.

Commercial concerts are also booming – the Royal Albert Hall in central London is holding more than 20 carol concerts this year.

But that is of little comfort to retailers struggling with falling sales. Figures for Christmas retail sales are not published until January, but in November, shopkeepers suffered their biggest annual fall in like-for-like sales since May, according to the British Retail Consortium (BRC). The value of retail sales on a like-for-like basis was 1.6 percent lower than a year ago.

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