Outlook dim as Brits face festive period costs

People who chose to spend in the run-up to Christmas look set to cut back in the new year as the cost of the festive period hits home and fears over the euro-zone debt crisis compound weak consumer sentiment.

Next, country's number two fashion retailer, said sales and profit growth in its 2012-13 year would be modest, citing concerns over the euro zone crisis, a credit squeeze and rising unemployment.

"My sense is the underlying economic situation is slightly worse than it was in September and that the only thing that has really changed is the situation in Europe," Next chief executive Simon Wolfson, a prominent Conservative Party supporter, told Reuters.

Britain's biggest department store chain John Lewis posted a 9.3 per cent rise in sales over the Christmas trading period, gaining market share and placing it firmly in the festive winners' camp.

However, sales in the week to December 31 fell 4.8 per cent, partly as the prior-year figure was boosted by spending in the last week before an increase in VAT sales tax.

Consumers lured by deep discounting in the run-up to Christmas might just have helped Britain fend off contraction for another quarter.

A survey published on Wednesday showed growth in the construction sector unexpectedly picked up in December, while a similar survey on Tuesday indicated manufacturing may be showing signs of stabilising after a two-month decline.

"The fact that we have had this steady, persistent improvement suggests we might manage to get some growth out of construction in Q4 and underpin some marginal expansion in GDP," said RBS economist Ross Walker.

A bumper Christmas for payday loans firm Ferratum suggests that for some the new year will bring a debt hangover. The lender said it had won several thousand new British customers in December, who took on short-term loans to buy presents, with a fourfold increase in applications for its loans from November to December.

Domino's (DOM.L), Britain's biggest pizza delivery company, has also seen the silver lining, as cost-conscious customers eschewed eating out. It said sales growth had accelerated in the final quarter and it was also on track to meet year profit forecasts.