Weak consumer confidence continued to hold back spending as the festive period failed to make amends for a challenging year of sluggish retail sales growth, shows data published today (9).
According to retailers body British Retail Consortium, for 2023 overall, UK Total Retail sales increased by 3.6 per cent from 2022. Food growth was 8.1 per cent and the Non-Food decline was 0.1 per cent for the year.
UK Total retail sales increased by 1.7 per cent in December, against a growth of 6.9 per cent in December 2022. This was below the 3-month average growth of 2.3 per cent and below the 12-month average growth of 3.6 per cent.
Food sales increased 6.8 per cent, is below the 12-month average growth of 8.1 per cent. Non-Food sales decreased 1.5 per cent on a total basis over the three-months to December, steeper than the 12-month average decline of 0.1 per cent.
Commenting on the performance of food and drink sector, Sarah Bradbury, CEO at IGD, said UK left 2023 on an encouraging note for food and grocery as December sales saw an increase on 2022.
"While these were down by a month-on-month comparison – continuing the trend seen in October and November – this is likely caused by falling food and drink inflation which has dropped for the eighth consecutive month. Volume increased slightly vs. December 2022, with Christmas week seeing the largest weekly year-on-year volume increase since April, likely helped by retailers cutting the prices of essential Christmas dinner vegetables.
“December was a quieter month in terms of news affecting shoppers, and as a result IGD’s Shopper Confidence Index score remained at -8, unchanged from November and up by 13 points compared with December 2022. This is a little lower than the longer-term pre-crisis average of -5, but the joint highest since August 2021 (-4)," Bradbury said.
Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said that the post-Christmas sales were unsuccessful in enticing spend in areas such as furniture and homeware, with households remaining cautious about making larger purchases. Sales saw a slight uptick in the week leading up to Christmas as consumers scrambled to purchase last minute gifts, particularly online, due to the wet weather. In gifting, beauty products were the standout performer, and toys and gaming also sold well.
“2024 looks to be another challenging year for retailers and their customers, and spending will continue to be constrained by high living costs. Retailers will also have to juggle various cost pressures, including the rise to business rates this April.
"This will be compounded by other emerging issues, such as the disruption to shipments from the Far East via the Red Sea. Political parties must consider this backdrop when they set out their plans for retail in manifestos so they can help support the industry to grow, invest, and serve customers.”
Commenting on the figures, Paul Martin, UK Head of Retail, KPMG, said that the festive feel good factor was lacking this year as many retailers faced a disappointing December with sales growth only up 1.7 per cent on 2022.
“Christmas shoppers ditched clothing, jewellery and technology gifts, opting for beauty, health and personal care products, which, along with food and drink drove festive sales this year. Online sales remained in negative territory, although the decline was weaker than seen in recent months with sales down nearly 1% on last year.
“Retailers rolled out promotions that lasted longer and were deeper than last year and higher promotional activity amongst supermarkets saw grocery price inflation fall at its fastest rate on record in December. Whilst promotions are margin dilutive, retailers have done some great work in re-engineering supply chains to make them more cost effective, which has given more room to push ahead with discounting, and given the current environment, this is likely to stay with us for a while.
"Despite falls in inflation, an upcoming cut in national insurance rates, and some consumers having more money in their pockets this Christmas than last, the constant drip of economic challenges they’ve faced over the last two years has finally come home to roost. As we start a new year, cautious consumers are battening down the hatches and retailers can expect to see significant downward pressures on demand in the opening months of this year, which will ease off by Spring if the economic conditions continue to improve and confidence slowly returns.”
