The song topped the Top 40 “most played” Christmas tracks, according to the list compiled by music licensing company PPL.
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The chart used data compiled from radio stations and television channels as well as public performance locations such as pubs, clubs, bars, jukeboxes, and shops all across the UK.
Originally released in 1987, the song recorded by The Pogues featuring Kirsty MacColl failed to top the singles chart, peaking at number two.
The song’s producer Steve Lillywhite, who was married to MacColl when recording the track, said: “The term timeless classic is reserved for very few records and by definition, you need time to have passed to define this.”
Radio 1 decided to play an edited version of the song this year, omitting the word “faggot”, deemed offensive by many.
The word was also cut from a BBC One repeat of last year’s Gavin & Stacey Christmas special, which featured a scene in which cast members sang the song.
80s best for Xmas songs
The 1980s was the decade which produced the most Christmas hits, the PPL chart found, with twelve 80s tracks in the top 40. 1984 alone produced four standout Christmas tracks.
Fairytale finished ahead of All I Want For Christmas Is You by Mariah Carey and Last Christmas by Wham! in the Top 40.
Peter Leathem, Chief Executive Officer at PPL, said: “During times of uncertainty and change the music we know and love can provide comfort and support, through good memories as well as hope for the future.
“It is no surprise then that Christmas music has been broadcast and played earlier than ever this year, providing relief during the pandemic.”