Festive Funds: The Economic Impact of Christmas

Christmas is a holiday without exclusive genesis. Originating in the 4th century, it has evolved from a modest celebration into a multifaceted, consumer-driven holiday. Its contested origins range from the birth of Jesus, the Roman Empire, to the spring equinox.

While associated with Christianity, Christmas incorporates traditions from various religious and cultural practices. Over centuries, cultural, religious, and commercial influences have shaped it into a commercial spectacle. Today, Christmas faces criticism for excessive commercialisation, with concerns about consumerism overshadowing its original religious and cultural significance.

So what is the true economic impact of Christmas, how did it become so expensive, and where does our money go?

A commercial Christmas

Many contemporary Christmas traditions find roots in Germanic, Scandinavian paganism, and Norse folklore, later adopted by Christianity and commercialized during industrialisation and the rise of capitalism.

The 19th-century surge in consumerism saw mass production, advertising, and the emergence of Santa Claus shaping Christmas into a season of material abundance. Technological advancements, media, and popular culture further propelled overindulgence, defining the commercial aspects of 21st-century festivities.

Today, the economic impact of Christmas is huge as it’s a global holiday celebrated by almost every country around the world between December 21st and January 7th.

Make it rein

It should come as no surprise that Christmas is the most expensive holiday of the year, closely followed by Mother’s Day and Valentine’s Day.

When looking at the cost of Christmas per country, Canada topped the bill in 2022, spending an average of £1,415 per household, with 55% going towards Christmas gifts. Germany, Australia, and the USA followed, while the UK ranked 7th with an average spend of £859, with 70% dedicated to presents and 12% on food.

Gift-giving takes centre stage during Christmas and has done so for some time, with more of us opting for store-based shopping this year. Clothing and apparel are the top choices for all generations, with toys coming in at a close second, followed by health & beauty and gift cards.

According to Statistica, the UK is projected to reach a total retail expenditure of £84.9 billion this Christmas. Food and drink still constitute a significant portion, with the average UK household spending £100 on festive treats.

The average expenditure per capita is expected to increase from £513 in 2019 to £748 this year. Regional variations indicate Londoners may spend up to £973 per person across the holiday season, although a recent article by Reuters suggests people are planning on cutting back this Christmas.

Is Christmas good for the economy?

The notion that Christmas helps prop up the economy, creates jobs, and perpetuates the financial stability of our economy is challenged by David Kyle Johnson, writer of “The Myths that Stole Christmas.” He argues that a healthy economy generates Christmas spending, not the other way around. Economist Joel Waldfogel claims that gift-giving is inefficient, citing the deadweight loss of Christmas, but others argue that the joy derived from gift-giving and sentimental value cannot be monetarily quantified.

The positive economic impact of Christmas is equally stated, with arguments made that increased production, discounted shopping days, and temporary job opportunities all lend to economic uplift. Food shopping is expected to hit highs of £13 billion this Christmas, with record-breaking spending predicted, driven in part by inflation. Conversely, rising living costs have led one in four Brits to use Buy Now Pay Later or credit cards this year.

Predictions of Christmas 2023 spending are varied, with some anticipating increased spending and others noting the lipstick effect, where people choose more affordable treats during economic hardship. The real impact will only become clear in hindsight.

When contemplating the impact of Christmas on treasury departments, if any, I spoke with a Treasurer working for a multinational organisation and this is what they had to say…

“In normal circumstances, there is a slowdown toward Christmas and most treasury activities are concentrated in the first half of December due to holidays and freeze periods. Preparation for the next year involves forecasting and updating tools and spreadsheets for the year to come. The official budget cycle ends in November so Christmas doesn’t significantly impact cash flow forecasting or funding. However, considering how strong Q4 is for the business, there could be a recalibration in case sales are stronger or weaker than expected.”

                             – International Treasury Manager, Multinational Cosmetics Company

Tips on Christmas saving

Google searches for “how to save for Christmas” have risen by 27% in the last 12 months according to Creditfix. So let’s look at some ways we can cut costs this Christmas and help others…

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