High Streets Initiative · 27 October 2017

Retail sales fall sharply amid softening consumer demand

Department store sales have suffered a large drop
Department store sales have suffered a large drop

UK retail sales have fallen sharply in the year to October, disappointing expectations for solid growth in the sector, according to data from the Confederation of British Industry (CBI).

The latest monthly data from the CBI’s Distributive Trades survey revealed that UK retail sales have fallen at the fastest rate since March 2009 – the peak of the financial crisis – in the year to October.

A survey of over 100 firms, half of which were retailers, revealed that orders placed with UK suppliers were also found to have fallen at the fastest rate since March 2009. The research found current levels of retail sales to be slightly lower than what’s considered the “seasonal norm” for this time of year.

Ecommerce sales growth slowed to a level slightly below the long-term UK average in the year to October. However, this is expected to increase in November as the Christmas shopping period approaches.

Amongst retailers, businesses selling recreational consumer goods, as well as hardware and DIY tool sellers, performed well. Department stores and specialist food and drink outlets, however, saw overall sales figures decline.

Wholesale businesses reported above average sales growth in the year to October, with that strong growth expected to continue in the coming months.

Commenting on the data, chief economist at the CBI, Rain Newton-Smith, said that retailers were beginning to “feel the pinch” of higher inflation.

“While retail sales can be volatile from month to month, the steep drop in sales in October echoes other recent data pointing to a marked softening in consumer demand,” he added.

“This is a critical time for a sector that employs three million people across Britain. The government can give retailers, especially those on the high street, some much needed relief in next month’s Budget by bringing forward the planned switch of business rates indexation from RPI to CPI.”

This week, a group of business organisations representing Britain’s retailers wrote a letter to the chancellor calling for support in the Budget ahead of the planned business rates increase in 2018. It has been estimated that retailers could see business rates rise by as much as £270m as a result of the increase.

Commenting on the letter and on the business rates burden for small businesses in general, chief executive of the British Retail Consortium (BRC), Helen Dickinson, said: “With retailers’ margins being squeezed to their limit, this is money that could be better spent investing in keeping prices low for consumers, in local communities up and down the country and in developing a workforce which is fit for the future.”

How high street independents can combat the three biggest retail challenges of 2018

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ABOUT THE EXPERT

Fred Heritage is deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London. He previously worked as a reporter at Global Trade Review magazine.

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