Britain’s hard-pressed households are cutting spending as they save for Christmas and higher fuel bills, shows an industry report today (7), aggravating fears that the UK is heading for a recession this winter.
According to figures by British Retail Consortium (BRC), sales growth slowed in October once inflation was taken into account.
Food sales increased 7.9 per cent on a total basis over the three months to October. This is below the 12-month average growth of 8.5 per cent. Non-Food sales decreased 1.0 per cent on a total basis over the three-months to October. This is below the 12-month average growth of 0.6 per cent.
Overall, UK total retail salesincreased by 2.5 per cent in October, against a growth of 1.6 per cent in October 2022. This was below the 3-month average growth of 3.1 per cent and the 12-month average growth of 4.2 per cent.
Commenting on the figures, Helen Dickinson OBE, Chief Executive of the British Retail Consortium, said, "Retail sales growth slowed as high mortgage and rental costs further shook consumer confidence. Many households are also delaying their Christmas spending in the hopes they can grab a bargain in the upcoming Black Friday sales.
"The cost-of-living squeeze meant more was spent on lower-price indulgences, such as beauty products – the so-called ‘Lipstick Effect’. Meanwhile, the arrival of some colder weather helped to boost fashion sales, particularly for outdoor wear.
“Retailers continue to invest in lowering prices and streamlining their operations, part of their commitment to delivering an affordable Christmas for their customers. But this is put at risk by the £470m-per-year rise in business rates facing retailers next year. The Chancellor must freeze rates in the upcoming Autumn Statement, to prevent extra cost pressure, pushing up prices for struggling consumers.”
Paul Martin, UK Head of Retail, KPMG, said, “Retail sales remained weak in October with growth of just 2.5 per cent. Food and drink and health and beauty categories continued to drive sales, while a mild October saw consumers put off shopping trips to replenish winter wardrobes. Online sales continued to struggle, with negative sales growth recorded in every category other than health and Other Non-Food. This could herald the most competitive Black Friday period that we’ve seen in a while.
“Whilst consumers are now operating in a lower inflationary environment compared to October last year where inflation peaked at over 11 per cent, there is no doubt that the last 12 months have taken a toll on confidence and their ability to spend. Coupled with a higher interest rate environment, dwindling covid savings and the heating coming back on, beleaguered consumers are thinking very carefully about how they spend their money. As a result, the strong demand that has kept some retailers afloat over the last 18 months is now falling away.
“Although the retail sector has done some sterling work around controlling their own cost environment, the health of the industry is at the mercy of macro demand. Retailers are facing a challenging Christmas, competing for a shrinking share of wallet, driven by promotions that will no doubt cut into already stretched margins. With spending levels expected to be much more muted this year, the run up to Christmas could be the most challenging we’ve seen since pre-pandemic days.”
Commenting on food and drink sector, Sarah Bradbury, CEO at IGD, said, "October’s food and drink sales enjoyed a slight increase in volume and value sales compared to last year, but value sales were slightly down on September’s performance. As the country enjoyed warm weather at the start of the month the market benefitted with a slight increase in footfall. Further good news came as inflation continued to fall against the steep increases seen a year ago, with shoppers benefitting from reduced prices, particularly from discounts offered by retailer’s loyalty schemes.
“Shopper confidence remained the same in October as September and continues to be at its highest level since December 2021. As inflation fell again, more shoppers expect food prices to fall in the year ahead – up to 12 per cent, compared with 8 per cent last month and 3 per cent in October ‘22. However, some 67 per cent expect prices to rise in the year ahead and IGD’s food price inflation forecast is for prices to rise, albeit at a slower rate, indicating there are still challenges ahead for the industry.”
