UK consumers will splash out almost £12 billion this Christmas – a 5 per cent increase on last year, according to the British Retail Consortium and Nielsen.

The BRC warned that increased selling space and discounting, which pulls down margins, would drive much of the uplift. Retailers take up to nearly 60 per cent of their annual turnover between November and January.

Like-for-like growth could be less than 3 per cent – a further signal of tightening consumer spend. Food retailers are forecast to deliver an increase of 4 per cent in like-for-likes.

The BRC and Nielsen estimates that each person will spend an average of£435 on Christmas gifts, 12 per cent more than last year. Sales of Christmas-related groceries and other festive paraphernalia will climb 4 per cent to£1.07 billion.

BRC director general Kevin Hawkins said: “The retail sector has experienced challenging trading conditions this year and, with tougher times ahead, these figures will be encouraging for many retailers.

“However, with the recent slump in consumer confidence and falling spending power growth this year is likely to be driven by discounting. If retailers do see a boom this Christmas, it will be followed by a slump in spending, as consumers really start to feel the pinch and tighten their belts.”