By Gemma Taylor -
The British Retail Consortium (BRC) has today claimed that growing fears of an economic downturn are affecting consumer spending and called on European policymakers to step in.
According to the BRC and KPMG, UK retail sales values in July were 0.6 per cent higher year-on-year on a like-for-like basis, while total sales were up 2.5 per cent over the same period.
In spite of an improvement in both food sales and clothing & footwear for July following poor results in June, homeware sales were down compared to the same period last year. This was attributed to continued caution over spending on big-ticket household-related purchases.
Non-food non-store trading slowed in July after early summer sales uplifted June’s figures, with sales 9.6 per cent higher than a year ago, compared with 11.5 per cent growth in June and 11.3 per cent annual comparisons in July 2010.
Director General of BRC Stephen Robertson believes that, while shoppers were tempted to spend while prices were low, overall sales have in fact decreased.
He explained: “This is a modest improvement on recent months but overall conditions remain very difficult for retailers. When you take into consideration inflation and January’s increase in VAT, 2.5 per cent growth effectively means people are buying fewer goods.
“Food sales continue to outperform non-food with inflation helping to drive top-line growth. But shoppers were only tempted into stores by an unprecedented number of promotions which come at the expense of margins. Sales of non-food goods barely grew, though clearance events helped summer clothing in particular.”
Helen Dickinson, Head of Retail at KPMG, agrees that major spending is not a priority for shoppers, as inflation continues to affect day-to-day spending.
“With pay rises hard to come by, consumers continue to feel the squeeze of higher prices and an uncertain outlook,” she commented.
“Retailers are hunkering down and managing stock tightly and none is particularly optimistic about the outlook, although many expect inflationary pressures to decrease in the latter part of the year.”
There are now concerns that the riots and looting experienced across London and other parts of the UK during the last three nights will have a major impact on August’s retail sales figures.
It is arguably the last thing companies operating in the sector needed after such a tough first half of trading, which has been punctuated with profits warnings and business administrations.
Robertson added: “Apart from March, when sales were reduced by this year’s later Easter, this is the weakest growth for non-store sales of non-food goods for almost two years.
“The long-term progress of online retailing means internet shopper numbers and how much they’re buying continue to increase but the squeeze on household budgets is causing that to slow as people cut back where they can.
“Growing fears of a global economic slowdown and a sovereign debt crisis have sent shockwaves through financial markets. Policymakers in Europe and the US must act quickly to implement a coordinated and credible strategy to reduce public sector deficits while supporting growth.
“Business and consumer confidence needs to be restored quickly before spending paralysis sets in.”