Christmas proved to be expensive for UK retail paid search marketers, as average CPCs increased by a third (30%) peaking at around £0.35.

According to a new report from Kenshoo, the rise was partly fuelled by a 27% increase in ad budgets compared to 2011.

There were predictable spikes in search spend at the beginning of December as retailers tried to cash in on the consumer rush to buy gifts in time for Christmas.

The report also reveals that paid search impressions increased by 18% during the Christmas period, likely indicating that consumers are using search engines more frequently, however shoppers clicked on 2% fewer ads.

But despite the drop in clicks, retailers did a better job of turning visits into sales with conversion rates up 10% compared to 2011.

As with 2011, conversion rates steadily rose from late November through the first three weeks in December. They didn’t drop until the final few days before Christmas, indicating that consumers in the UK were still shopping late into the season.

Kenshoo’s report also shows that shopping days such as ‘Cyber Monday’ and ‘Green Monday’ aren’t just catchy PR terms.

On Cyber Monday, which fell on December 3, both advertisers and consumers kicked into shopping mode with ad spend jumping by 34% and revenues by 7%.

Then on Green Monday, which fell on December 10, paid search budgets increased by 36%, driving an 11.5% increase in year-on-year sales revenue.

Overall, the report is further evidence that the UK search industry is in extremely good health.

Last year we frequently reported stats from the like of Adobe and Marin which showed that search spend was increasing year-on-year, and last week a new report from IgnitionOne showed that overall paid search spend increased by 19% in Q4 2012 compared to Q4 2011.

Kensoo’s report also includes stats on mobile paid search, which shows that tablets accounted for almost one fifth (18%) of UK paid search clicks for retailers in 2012 compared to 13% on smartphone.