Brexit uncertainty hits retail growth

Uncertainty surrounding the UK’s imminent exit from the European Union has hit consumer spending, according to Helen Dickinson OBE, chief executive of the British Retail Consortium (BRC).

She said: “While real incomes have started to rise over the past year, shoppers were reluctant to spend this February, holding back growth. This slowdown was not limited to physical stores, with growth in online non-food sales well below the 12-month average.

The latest statistics from the BRC and KPMG show that in the period from January 27 to February 23, sales increased on a total basis by 0.5% in February, against an increase of 1.6% in February 2018. This is below both the 3-month and 12-month averages of 0.9% and 1.2% respectively.

In February, UK retail sales decreased by 0.1% on a like-for-like basis from February 2018, when they had increased 0.6% from the preceding year. Online sales of non-food products grew 5.4% in February, against a growth of 6.4% in February 2018. This is below the 3-month average of 5.6% and pulls down the 12-month average to 6.9%.

Helen added: “With consumers increasingly aware of the risk of a no deal Brexit, it is likely that uncertainty has driven this cautious approach to retail spending. If the government wishes to reassure both the public and businesses, they should ensure that a chaotic no deal – which would lead to higher costs, higher prices, and less choice for consumers – is taken off the table with immediate effect.”

Paul Martin, UK head of retail at KPMG, noted: “Following a modest recovery in January, February saw a slowdown in sales. While consumer spending has so far remained relatively resilient, driven by factors such as low unemployment and wage growth, it would seem that continuing political and economic uncertainties are beginning to notably affect shoppers’ spending habits.

“Across all categories there was sluggish growth, and the milder weather appears to have shifted the focus away from indoors, with furniture sales declining – and not even Valentine’s Day could boost sales in the stationery category. However, the full impact of the recent unseasonably warm weather is yet to be seen, especially for the clothing categories, and online sales growth remained steady.

“Non-food continues to be under more pressure than grocery, with shoppers focusing on the essentials. To manage these dynamics, retailers have to continue managing cost and margin and carefully assess how to gain market share in a broadly flat market.”

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